If You Want to Save $40 000 for a Down

question 63

Multiple Choice

If you want to save $40 000 for a down payment on a home in five years, assuming an interest rate of 4.5 percent compounded annually, how much money do you need to save each month?

• A)$666
• B)$697
• C)$662
• D)$597

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Definitions:

Overconfidence

A cognitive bias where an individual's subjective confidence in their own abilities is greater than their objective accuracy.

Representativeness Heuristic

A mental shortcut that involves making a decision based on how closely a new situation or object resembles a prototype or typical case.

Fixation

The inability to see a problem from a new perspective, by employing a different mental set.

Heuristics

Mental shortcuts or rules of thumb that allow people to make decisions and solve problems quickly and efficiently, though not always perfectly accurate.