One of the Core Problems That Created the Financial Meltdown

question 22

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 who how poor the prospects of repayment were. Which of the following decision making error was made by the lenders and borrowers?

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

---

Definitions:

Liability

An obligation of an entity arising from past transactions or events, the settlement of which is expected to result in an outflow of resources embodying economic benefits.

Date Of Record

The specific date set by a company on which the shareholders of record are entitled to receive dividends or other distributions.

Dividend Payment Date

The specific date on which a company's dividend payment is to be made to shareholders of record.

Dividend Yield

A financial ratio that shows how much a company pays out in dividends each year relative to its share price.