Suppose That It Is Friday Night, That Xavier and Her

question 182

Multiple Choice

Suppose that it is Friday night, that Xavier and her friends have been out at a party, and that they are now heading home. Suppose also that Xavier has had a little bit to drink, but not a lot. Is it safe for her to drive home or should she call a cab instead? How will she decide what to do? According to the risk-as-feelings hypothesis, ____.

• A) her current mood will influence her assessment of risk (e.g., if she is in a relatively good mood, she will see relatively little danger in driving)
• B) she will consult her friends and see what their feelings are about the issue
• C) she will consider the worst possible scenario, and then simply make a decision based on her gut
• D) she will recall the last time that she was in this situation, what she did, and how she felt about it. She will then let that recollection guide her decision

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Definitions:

Required Rate Of Return

The minimum return an investor expects to achieve by investing in a particular asset, reflecting the risk level of the investment.

Combined ROI

A measure of the total return on investment from multiple investments or projects, combined into one metric.

Investment Opportunity

An item or asset obtained with the intention of producing income or increasing in value.

Residual Income

The amount of income that an individual or company has after all personal debts and expenses, including the cost of capital, have been paid.