The Ultimatum Game Reveals That

question 93

Multiple Choice

The ultimatum game reveals that

• A) it does not make sense to try to maximize profits.
• B) people may have an innate sense of fairness that economic theory does not capture.
• C) offering someone a wildly unfair outcome is usually ok since people tend to make decisions using a "something is better than nothing" philosophy.
• D) Both a and b

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Definitions:

Yield To Call

The return a bondholder gets if the bond is held until the call date, which is before the bond's actual maturity date.

Expected Capital Gains Yield

The anticipated rate of return from an investment due to an increase in its market price.

Reinvestment Rate Risk

Occurs when a short-term debt security must be “rolled over.” If interest rates have fallen, the reinvestment of principal will be at a lower rate, with correspondingly lower interest payments and ending value.

High-Coupon Bonds

Bonds that offer a higher-than-average interest rate (coupon) compared to others in the market, reflecting potentially higher risk.