The Present Value of $500 Received at the End of Each

question 44

True/False

The present value of $500 received at the end of each of the next three years is $1,243 (assuming a 10% interest rate).

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Definitions:

Representativeness Heuristic

The representativeness heuristic is a mental shortcut that involves judging the likelihood of an event by comparing it to an existing prototype in our minds.

Belief Perseverance

The tendency to maintain one's belief even in the face of contradictory evidence.

Overconfidence Phenomenon

A cognitive bias where a person's subjective confidence in their judgments is reliably greater than their objective accuracy.

Preconceptions

Ideas or opinions formed before having the evidence for their truth or usefulness, often acting as biases or assumptions.