An Investor Is Faced with the Decision of Whether to Invest

question 34

Multiple Choice

An investor is faced with the decision of whether to invest in a stock with an expected return of 14% or a stock in the same industry with an expected 20% return.Which of the following seems most likely?

• A) The 20% stock is a better investment.
• B) The 14% stock is overpriced.
• C) Both stocks will have approximately the same return.
• D) Both stocks are priced correctly given their perceived risk.

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Definitions:

Denial

A psychological defense mechanism where confrontation with a reality is avoided by denying the existence of the reality.

Depression

A mood disorder characterized by persistent feelings of sadness, hopelessness, and a lack of interest or pleasure in activities, affecting daily functioning.

Neuroconstructivist Perspective

An approach to understanding cognitive development that emphasizes the importance of both neural mechanisms and environmental factors.

Cognitive Functioning

Cognitive functioning pertains to the mental processes involved in gaining knowledge and comprehension, including thinking, knowing, remembering, judging, and problem-solving.