Tiger State Bank

question 2

Essay

Tiger State Bank
$\begin{array}{|l|l|l|}\hline \text { Assets } & \text { Duration } & \text { Market Value } \\\hline \text { Overnight Money } & 0.0 & £ 3 \text { Million } \\\hline \text { 1-year T-Bonds } & 0.6 & £ 8 \text { Million } \\\hline \text { Loans } & 2.20 & £ 20 \text { Million } \\\hline \text { Mortgages } & 7.50 & £ 8 \text { Million } \\\hline & & \\\hline \text { Liabilities } & \text { Duration } & \text { Market Value } \\\hline \text { Checking Accounts } & 0.0 & £ 20 \text { Million } \\\hline \text { Short-term CD's } & 0.4 & £ 4 \text { Milion } \\\hline \text { Longterm CD's } & 3.20 & £ 12 \text { Million } \\\hline & & \\\hline \text {Equity}& & £ 3 \text { Million }\\\hline\end{array}$

---

Definitions:

Mental Accounting

A concept in behavioral economics that refers to the different values people place on money, based on subjective criteria, affecting economic decision-making.

Confirmation Bias

The tendency to search for, interpret, favor, and recall information in a way that confirms one’s preexisting beliefs or hypotheses, often leading to statistical errors.

Affect Heuristic

A mental shortcut used in decision making and judgement that involves relying on emotions and feelings.

Regret Aversion

A theory in behavioral economics that describes the emotional reaction people experience after realizing they have made an error in judgment, leading them to avoid making decisions.