In Terms of Behavioural Theory, Overconfidence Can Result In

question 25

Multiple Choice

In terms of behavioural theory, overconfidence can result in:

• A) individual investors being mistakenly convinced that they can regularly beat the market.
• B) sharemarket investors less likely to speculate by regularly trading in stocks.
• C) people deviating from rational thinking in making judgements where there is an element of uncertainty.
• D) both a and c

Understand the relevance and application of the internal rate of return (IRR) in evaluating investment opportunities.

Grasp the concepts of salvage value, cash inflows, and depreciation in the context of capital budgeting.

Appreciate the impact of tax rates on investment decisions and profitability.

Understand the concept of hurdle rates and its application in investment decision-making.

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Definitions:

Downward Influence

The impact or control exerted by individuals in higher positions within an organization upon those in lower positions.

Rational Persuasion

Using logical arguments and factual evidence to convince others to change their attitudes, beliefs, or behaviors.

Consultation

The process of seeking advice or expertise from someone with specialized knowledge to guide decision-making or problem-solving.

Inspirational Appeal

A communication strategy where leaders motivate others by appealing to their values, emotions, and beliefs to inspire action.