The Study of the Cognitive Processes and Biases Associated with Making

question 70

Multiple Choice

The study of the cognitive processes and biases associated with making financial and economic decisions is known as

• A) asset pricing model.
• B) behavioral finance.
• C) efficient market hypothesis.
• D) stock market bubble.

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Definitions:

Treasury Bond

A long-term, fixed-interest government debt security with a maturity of more than ten years.

Liquidity Risk

The risk of loss to an investor from the inability to sell a security to another investor at a price close to its true value.

Maturity Risk

The risk associated with the time until the bond or other fixed income instrument pays its principal back. It can affect interest rates and investment value.

Default Risk

The likelihood that a borrower will fail to meet the obligations of paying back debt, impacting the safety of the investment.