Suppose You Are Deciding Whether or Not to Buy a Particular

question 134

Multiple Choice

Suppose you are deciding whether or not to buy a particular bond for $5,980.17. If you buy the bond and hold it for 5 years, then at that time you will receive a payment of $10,000. You will buy the bond today if the interest rate is

• A)no less than 9.48 percent.
• B)no greater than 9.48 percent.
• C)no less than 10.83 percent.
• D)no greater than 10.83 percent.

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Definitions:

Bounded Rationality

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

Herbert Simon

An American economist and cognitive psychologist known for his research in the fields of decision-making and problem-solving, notably the concept of bounded rationality.

Behavioural Economic Theory

An approach combining psychological insights with economic theory to predict and understand human decision-making.

Ideal Goals

Objectives or aims that represent a perfect or most desirable outcome, often used as benchmarks for success or aspiration.