The Term Structure of Risk-Free Canadian Interest Rates Provides the Yield

question 12

Multiple Choice

The term structure of risk-free Canadian interest rates provides the yield curve that can be used to compute

• A) present value of a risk-free cash flow over different investment horizons.
• B) future value of a risk-free cash flow over different investment horizons.
• C) both present and future values of a risk-free cash flow over different investment horizons.
• D) none of the above.

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Definitions:

Cognitive Biases

Cognitive biases are systematic patterns of deviation from norm or rationality in judgment, often leading to illogical interpretation or decision-making.

Behavioral Economics

A field of economics that examines how psychological, cognitive, emotional, cultural, and social factors affect the economic decisions of individuals and institutions and how those decisions vary from those implied by classical theory.

Systematic Error

A consistent, predictable error present in the method of measurement that affects the accuracy of results.

Faulty Heuristics

Cognitive shortcuts that lead to errors in judgment or decision-making.