An Investor Has the Opportunity to Buy a $10 000

question 71

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 whether the $10 000 will be needed elsewhere.
• D)It does not consider the value of the $10 000 in one year's time if invested elsewhere.

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Definitions:

Rewarding

pertains to the act of providing a positive response or reinforcement following a desired behavior, increasing the likelihood of the behavior's recurrence.

Proximal

Situated nearer to the center of the body or the point of attachment.

Reciprocity

A social principle that involves exchanging things with others for mutual benefit.

Attraction

A magnetic quality or force that draws individuals together, leading to friendship, love, or interest.