Steve Is Offered an Investment Where for Every $1

question 23

Multiple Choice

Steve is offered an investment where for every $1.00 invested today, he will receive $1.10 at the end of each of the next five years. Steve concludes that in five years he will have $1.10 for every $1.00 invested and that this investment will increase his personal value. What is Steve's major error in reasoning when making this decision?

• A) He ignores the fact that the costs and benefits of the investment are not stated in the same terms.
• B) He ignores the benefits of consuming the $1.00 today against the benefits of consuming the $1.00 five years from now.
• C) He fails to consider the costs of not consuming the $1.00 today.
• D) He considers that the value of the cash he may have in the future is the same as the value of cash he has today.

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Definitions:

Fussy Eater

Refers to individuals, often children, who are very selective about the foods they eat, often resisting new foods or having a limited range of foods they will consume.

Basal Metabolic Rate

The speed at which energy is burned by the body to sustain crucial life functions including breathing and warmth preservation during rest.

Leptin

A hormone produced by fat cells that helps to regulate energy balance by inhibiting hunger, thereby contributing to the regulation of body weight.

Strict Diet

A Strict Diet involves following a very precise and often restrictive eating plan, typically for health or weight loss reasons.