The Tendency to Give More Weight to Possible Losses Than

question 37

Multiple Choice

The tendency to give more weight to possible losses than to possible gains when making decisions that require tradeoffs is known as ____.

• A)the certainty effect
• B)temporal discounting
• C)risk aversion
• D)the status quo bias

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Definitions:

Target Cash Balance

The optimal level of cash a company aims to maintain to manage daily operations and accommodate unexpected expenses or investment opportunities.

Cash Flow Uncertainty

The unpredictability regarding the amounts and timing of cash flows into or out of a business.

Marketable Securities

Short-term financial instruments that are easily convertible into cash, such as government bonds or certificates of deposit.

NPV

Net Present Value; a method used in capital budgeting to evaluate the profitability of an investment or project by calculating the difference between the present value of cash inflows and outflows.