In Rosenhan's Experiment in Which He and Several Colleagues Had

question 34

Multiple Choice

In Rosenhan's experiment in which he and several colleagues had themselves committed to mental hospitals with a diagnosis of "schizophrenia," the staff at the hospital

• A)recognized these phony patients as "phony" during the initial interview.
• B)recognized these phony patients as "phony" when they were caught taking notes on their observations.
• C)recognized these phony patients as "phony" when they dropped all pretense of mental illness and acted normally.
• D)never recognized these phony patients as "phony," although the real patients did see through their pretense.

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Definitions:

Bond

A fixed income instrument that represents a loan made by an investor to a borrower, usually corporations or governmental agencies, which includes the terms of the loan, interest payments, and the time at which the loaned funds must be repaid.

Interest Rate Parity

An economic theory stating that the difference in interest rates between two countries is equal to the expected change in exchange rates between their currencies.

Unbiased Forward Rates

Financial theory suggesting that forward exchange rates should be an unbiased predictor of future spot exchange rates.

Covered Interest Arbitrage

An investment strategy that involves exploiting the interest rate differential between two countries while using forward contracts to hedge against currency risk.