Why Should You Approach Every Problem by Drawing a Timeline

question 26

Multiple Choice

Why should you approach every problem by drawing a timeline?

• A) Timelines identify events in a transaction or investment which might otherwise be easily overlooked.
• B) Timelines eliminate the majority of flawed financial decisions.
• C) Timelines allow you to quickly sum cash flows over time.
• D) Timelines can be used to schedule events which are yet to occur.

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Definitions:

Efficient Behavior

Efficient behavior refers to actions that maximize the desired outputs or results with the least amount of wasted effort or resources.

Insurance Industry

The sector of the economy that provides coverage against financial loss, including various types of insurance products and services.

Moral Hazard

The risk that one party to a contract can change their behavior to the detriment of another after the contract has been concluded.

Adverse Selection

A situation where sellers have information that buyers do not, or vice versa, often resulting in a market failure.