Steve Is Offered an Investment Where for Every $1

question 68

Multiple Choice

Steve is offered an investment where for every $1.00 invested today, he will receive $1.10 in five years' time. Steve concludes that in five years' time he will have $1.10 for every $1.00 invested and that this investment will increase his personal value. What is Steve's major error in reasoning when making this decision?

• A)There may be other investments that he can make that will offer even bigger benefits.
• B)The investment may have hidden costs that will reduce the amount of benefit he receives.
• C)The value of the cash he has today is greater than the value of the cash he may have in the future.
• D)Costs and benefits must be in the same terms to be compared.

---

Definitions:

Facial Expression

Movements of the facial muscles that communicate emotions or reactions and are a significant aspect of non-verbal communication.

Emotional Reactions

The spontaneous response of the emotional system to an event, thought, or memory, varying greatly in intensity and type.

Schachter And Singer Theory

A theory of emotion which suggests that physiological arousal occurs first, followed by the identification of the reason for this arousal which then leads us to experience and label the emotion.

James-Lange Theory

A hypothesis proposing that emotions are the outcome of physical responses to occurrences.