An Investor Has the Opportunity to Buy a $10,000 Government

question 53

Multiple Choice

An investor has the opportunity to buy a $10,000 government bond which is guaranteed to yield 6.5% interest in one year's time.The investor decides to make the investment as there is a net difference between the cost and benefit.Which of the following is NOT a reason that the investor's decision may be flawed?

• A)It does not consider the current market interest rate.
• B)It ignores the fact that the costs are incurred today,but the benefits occur in one year's time.
• C)It does not consider the value of the $10,000 in one year's time if invested elsewhere.
• D)It does not consider whether the $10,000 will be needed elsewhere.

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Definitions:

Decision-Making Process

The cognitive process leading to the selection of a course of action among variations.

Objective

A specific, measurable, and achievable target or goal that an individual or organization aims to accomplish.

Recognizing Problem

The initial step in problem-solving, involving the identification of a problem's existence.

Bounded Rationality

A concept suggesting that decision-making is limited by the information available, the cognitive limitations of the individual, and the finite amount of time they have to make a decision.