One of the Core Problems That Created the Financial Meltdown

question 73

Multiple Choice

One of the core problems that created the financial meltdown of 2008 was that large loans were made to individuals who could not repay them, and the finance companies purchased these bad debts without realizing how poor the prospects of repayment were. Which of the following decision-making errors was made by the lenders and borrowers?

• A) hindsight bias
• B) availability bias
• C) overconfidence bias
• D) confirmation bias
• E) anchoring bias

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Definitions:

Quantitative Indication

Numerical evidence or metrics that signal the performance, situation, or condition of an entity or market.

Key Management Personnel

Individuals with authority and responsibility for planning, directing, and controlling the activities of an entity, typically at a high level.

Related Party Transactions

Financial transactions or arrangements between the reporting entity and any related parties, such as its management, significant shareholders, or affiliates.

Remuneration

Payment or compensation received for services rendered or employment, including salaries, wages, and benefits.