Which of the Following Cognitive Biases in Finance Suggests That

question 12

Multiple Choice

Which of the following cognitive biases in finance suggests that people tend to judge Event A to be more probable than Event B when A appears more representative than

• A) Mental accounting
• B) Biased expectations
• C) Reference dependence
• D) Representativeness heuristic

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Definitions:

Minority Passive Investments

Investments in which the investor holds a non-controlling stake and does not actively participate in management.

Trading Securities

Securities that are purchased by a company not for long-term investment but rather with the intent to trade for short-term gains.

Available-For-Sale Securities

Financial assets that are intended to be sold before their maturity but are not classified as trading securities.

Investment Account

A financial account held at a financial institution or brokerage that is used to hold securities, stocks, bonds, mutual funds, and other investments.