Every Time Kirk Shops for Wine, He Chooses Which Brand

question 38

Multiple Choice

Every time Kirk shops for wine, he chooses which brand to purchase based on the how expensive the bottles are. He tries to choose one that isn't too cheap.Kirk is using what type of heuristic?

• A)Simulation heuristic
• B)Price-quality heuristic
• C)Rationalization heuristic
• D)Price-segmentation heuristic
• E)Representativeness heuristic

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Definitions:

Annual Coupon Rate

A bond's yearly interest payment to its holders, expressed as a percentage of the bond's face value.

Maturity

The specified time at which the principal amount of a bond or loan is due to be paid back to the lender.

Call Premium

The additional amount that must be paid over the par value by the issuer to redeem a callable security before its maturity date.

Default Risk Premium (DRP)

The additional yield that investors demand for holding a bond that has a risk of default over a risk-free bond.