When Jonathan Ran for Class President, It Never Occurred to Him

question 31

Multiple Choice

When Jonathan ran for class president, it never occurred to him that he could lose. This tendency is known as:

• A) hindsight bias.
• B) the representativeness heuristic.
• C) the availability heuristic.
• D) the overconfidence phenomenon.

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Definitions:

Risk-Free Rate

The estimated profit percentage from an investment considered free of risk, typically indicated by government bonds' interest rates.

Common Stock

A type of security that represents ownership in a corporation, entitling the holder to vote at shareholder meetings and receive dividends.

Weighted Average Cost of Capital

This refers to the overall cost of capital for a firm, weighted by each capital component's proportion in the overall capital structure.

Market Value of Equity

The total dollar market value of a company's outstanding shares, calculated as share price times the number of shares outstanding.