The Concept That People Have the Time and Cognitive Ability

question 67

Multiple Choice

The concept that people have the time and cognitive ability to process only a limited amount of information on which to base decisions is known as:

• A) satisficing
• B) normative approach
• C) classical model of decision making
• D) bounded rationality
• E) scientific approach.

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Definitions:

Actively-managed Mutual Funds

Mutual funds where managers actively make investment decisions in an attempt to outperform a specific benchmark.

Underperformance

A return on an investment that is lower than the benchmark or expectations.

Direct-sold Funds

Direct-sold funds are mutual funds or similar investment vehicles that are offered directly to investors by the managing company, without the need for a financial advisor or broker.

Risk Premium

The extra return expected by an investor for holding a higher-risk investment over a risk-free asset.