To Use the Concept of Duration to Analyze the Effect

question 48

Multiple Choice

To use the concept of duration to analyze the effect of changes in interest rates on the market value of an asset,a bank manager would multiply

• A) the negative of the duration of the asset by the change in the interest rate, ?i.
• B) the negative of the duration of the asset by ?i /(1 + i).
• C) the duration of the asset by the change in the interest rate, ?i.
• D) the duration of the asset by ?i /(1 + i).

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Definitions:

Framing Effects

Framing effects are cognitive biases where an individual's choice is influenced by the way information is presented, rather than just the information itself.

System 1

An automatic, fast, and often unconscious way of thinking, as described in dual-process theories of cognition.

Framing Effects

The influence on decision-making and judgment caused by the way information is presented, where different phrasing, presentation, or context can significantly alter individuals' choices.

Self-Serving Bias

A cognitive bias where individuals attribute positive outcomes to their own actions but negative outcomes to external factors.