People Who Fail to Take Inflation into Account When Calculating

question 47

Multiple Choice

People who fail to take inflation into account when calculating losses may be:

• A) unbiased loss-averse.
• B) using real variables to make decisions.
• C) loss-averse.
• D) acutely loss-averse.

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Definitions:

Par

The face value of a bond or other security, which is the amount the issuer promises to repay at maturity.

Dollar-Weighted Return

A measure of an investment's return, taking into account the timing and size of cash flows into and out of the investment.

Internal Rate of Return

An estimate of the profitability of potential investments, calculated as the rate of return that sets the net present value of all cash flows (both positive and negative) from the investment equal to zero.

Holding-Period Return

The total return received from holding an asset or portfolio of assets over a specified period, including interest, dividends, and capital gains.