When Asked to Introspect About Their Reasons for Making a Particular

question 58

Multiple Choice

When asked to introspect about their reasons for making a particular choice, participants

• A) sometimes offer an explanation with great confidence even though the explanation names factors that they know to be irrelevant and leaves out factors that they know to be crucial.
• B) can usually specify their reasons and accurately report on the processes used for selecting the reasons.
• C) often have no idea about their reasons, but if they are able to report their reasons, they are likely to be correct.
• D) report their reasons in general terms but do so with little confidence.

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Definitions:

Effective Interest Rate

The real cost of borrowing, taking into account the effects of compounding interest.

Debt Security

A financial instrument representing a loan made by an investor to a borrower, typically corporate or governmental, where the borrower is obligated to pay back with interest.

Expected Cash Flows

The estimated amount of money to be received or paid out over a period in the future.

Other-Than-Temporary Impairments

Losses recognized on investments when a decline in value is judged to be long-term rather than temporary, impacting the value of securities on a balance sheet.