Heuristics in Decision Making

question 83

Multiple Choice

Heuristics in decision making

• A) may become a liability when they are applied inappropriately.
• B) always lead us to the correct decision.
• C) are mathematical formulas that precisely predict how people will perform on decision-making tasks.
• D) are helpful in decision-making situations, but people rarely apply them.

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Definitions:

Financial Leverage

Financial leverage is the use of borrowed funds to increase the potential return of an investment, magnifying both potential gains and potential losses.

Dividend Rate

The total expected dividend payments from an investment or security expressed on an annual basis.

Premium on Stock

The amount by which the price paid for a stock exceeds its par (or nominal) value, representing additional capital paid in by investors.

Treasury Stock

Stocks that the issuing entity initially sold and then bought back, decreasing the total number of stocks available in the market.