Which of the Following Statements Is False

question 2

Multiple Choice

Which of the following statements is false?

• A) Often, the decision to abandon a project entails costs, which may be either positive or negative.
• B) Mortgage interest rates are higher than Treasury rates because mortgages have an abandonment option that Treasuries do not have: You can prepay your mortgage at any time, while the U.S. government can repay its debt only according to the schedule outlined in the bond contract.
• C) A popular option gives holders of the bond the option to convert the bond into equity. These kinds of bonds are termed callable bonds.
• D) More often than not, there is an opportunity cost of abandoning a project: If you shut down the project and later decide to start it up again, you have to pay the costs of restarting the project.

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Definitions:

Drive Reduction Theory

A theory in psychology that explains motivation as being rooted in the desire to reduce internal tensions caused by unmet biological needs.

Erikson's Psychosocial

Refers to Erik Erikson's theory which includes eight stages of human development, each characterized by a central psychosocial conflict that shapes an individual's personality.

Drive Reduction

A theory in psychology that motivation arises from the body's attempt to reduce the state of tension caused by unmet biological needs.

Wire and Cloth

A reference to a set of classic experiments in developmental psychology, often associated with attachment theory, where baby monkeys showed preference for cloth surrogate mothers over wire ones, despite the wire mothers providing food.