Define the Following Cognitive Biases

question 13

Essay

Define the following cognitive biases:
a. Mental accounting.
b. Biased expectation.
c. Reference dependence.
d. Representativeness heuristic.

---

Definitions:

Real Return

The rate of return on an investment after adjusting for inflation, representing the actual purchasing power gained or lost.

Purchasing Power

The value of currency expressed in terms of the amount of goods or services that one unit of money can buy.

Inflation

The measure of growth in the overall price level for products and services, devaluing the currency's purchasing power.

Premium Bond

A bond sold at a price higher than its face value, typically occurring when it has a higher interest rate than the current market rate.