Many Individuals Will Refuse to Sell a Stock or a Mutual

question 30

Multiple Choice

Many individuals will refuse to sell a stock or a mutual fund at a loss even though it may be clear that the investment will not turn around. This is an example of a:

• A) sunk-cost trap.
• B) anchoring trap.
• C) status-quo trap.
• D) confirming-evidence trap.

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Definitions:

Homeowner Bailouts

Financial assistance programs designed to help homeowners facing foreclosure, often as a result of economic crises, by providing refinancing, loan modifications, or other aids to prevent loss of their homes.

Moral Hazard

A situation where one party engages in risky behavior knowing that they are protected against the consequences, often because another party bears the cost.

Irresponsible Borrowings

Financial behavior that involves taking on debt in ways that are unsustainable or without a plan to manage repayment, leading to potential financial harm.

Shirking

The behavior of employees who avoid doing their work or put in less effort than is expected, which can negatively impact productivity.