Which of the Following Is the Best Example of a Precommitment

question 117

Multiple Choice

Which of the following is the best example of a precommitment used to overcome time inconsistency.

• A) Finding a running partner and setting a regular schedule of when you will run together.
• B) Deciding to save a percentage of each month's paycheck.
• C) Signing up for a free trial membership at the local gym.
• D) Buying an alarm clock.

---

Definitions:

Long-Term Bonds

Debt securities with a maturity period typically longer than 10 years, offering the holder a fixed or variable interest rate.

Historical Return

Refers to the past performance of an investment or an index, usually expressed as a percentage change from the initial investment.

Small Stocks

These are shares of companies with a relatively small market capitalization, often considered to be more volatile but potentially offering higher returns compared to larger companies.

Long-Term Bonds

Bonds with a longer maturity period, typically more than 10 years, offering potentially higher yields but increased interest rate risk.