As You Slowly Inch Your Way Toward the Intersection, You

question 270

Multiple Choice

As you slowly inch your way toward the intersection, you finally see the auto accident that was stalling traffic. As you look at the two drivers standing by their crumpled cars, you think to yourself, "They probably had the accident because they're careless drivers." Your thinking reflects which of the following concepts?

• A) hindsight bias
• B) implicit cognition
• C) the self-serving bias
• D) the fundamental attribution error

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Definitions:

Forward Contract

An agreement to buy or sell an asset at a future date for a price agreed upon today, without the standardization of futures contracts.

Exchange Rate Risk

The potential for investors to experience losses due to changes in the exchange rate between two currencies.

Short-term

This term usually refers to a period of time less than one year, often used in the context of finance for investments or liabilities.

International Fisher Effect

An economic theory that suggests that the difference in nominal interest rates between two countries is directly proportional to the expected change in the exchange rate between their currencies.