If the Interest Rate on a Loan Changes According to the Daily

question 16

Multiple Choice

If the interest rate on a loan changes according to the daily average of the prime rate over the life of the loan,the interest rate is said to be

• A) floating.
• B) non-variable.
• C) fixed.
• D) sporadic.
• E) flexible.

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Definitions:

Preferences

Individual choices or priorities that influence decision-making in various situations.

Behavioral Economists

Scholars who study the psychological, social, cognitive, and emotional factors affecting the economic decisions of individuals and institutions.

Status Quo Bias

The tendency most people have when making choices to select any option that is presented as the default (status quo) option. Explainable by prospect theory and loss aversion.

Anchoring

A cognitive bias in decision-making where individuals rely too heavily on an initial piece of information (the "anchor") when making judgments.