Describe the Major Tools and Criteria for Decision Making -What Is the Average Payoff for the 3-Year ARM?
A)

question 49

Multiple Choice

Describe the major tools and criteria for decision making. Use the information below to answer the following question(s) . Below is a payoff table that lists four mortgage options: $$\begin{array} { | l | l | l | l | } \hline &{ \text { Outcome } } \\\hline \text { Decision } & \text { Rates Rise } & \text { Rates Stable } & \text { Rates Fall } \\\hline \text { 1-year ARM } & \$ 66,645 & \$ 43,650 & \$ 38,560 \\\hline \text { 3-year ARM } & \$ 62,857 & \$ 47,698 & \$ 42,726 \\\hline \text { 5-year ARM } & \$ 55,895 & \$ 50,894 & \$ 48,134 \\\hline \text { 30-year fixed } & \$ 52,276 & \$ 52,276 & \$ 52,276 \\\hline\end{array}$$
-What is the average payoff for the 3-year ARM?

• A) $ 52,792
• B) $ 45,212
• C) $ 51,094
• D) $ 55,278

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Definitions:

Realistic Expectations

The anticipation or belief about what might reasonably happen or be achieved in the future.

Optimistic Appraisal

The process of interpreting situations and future events in a positive, hopeful manner.

Internal, Stable, and Global

Terms used in psychology to describe an individual's attribution style that perceives causes of events as internal to oneself, unchanging over time, and consistent across different contexts.

Optimism

A mental attitude reflecting a belief or hope that the outcome of some specific endeavor, or outcomes in general, will be positive, favorable, and desirable.