Imagine That a Young Child Is Just Learning About the Category

question 24

Multiple Choice

Imagine that a young child is just learning about the category "dog." Thus far,she has experienced only two dogs,one a small poodle and the other a large German shepherd.On her third encounter with a dog,she will be LEAST likely to correctly categorize the animal as a dog if that animal

• A)matches the size of the poodle but is of a different breed.
• B)is a dog that does not bark.
• C)matches an exemplar of one of the dogs she has experienced.
• D)is similar to an "average" for the dogs she has encountered.

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Definitions:

Designated Market Maker

A designated market maker is a market participant responsible for maintaining liquidity in a financial market by buying and selling securities.

Securities

Assets indicating equity in a publicly-traded company, a bond signifying indebtedness to a company or government, or options granting ownership rights.

Collateralized Debt Obligations

Collateralized debt obligations (CDOs) are complex financial instruments that pool together cash flow-generating assets and repackages this asset pool into discrete tranches that can be sold to investors.

Default Risk

The potential that a borrower will fail to meet the obligations of a loan or debt agreement.