If the Rate of Return Is Higher Than the Cost

question 93

Multiple Choice

If the rate of return is higher than the cost of borrowing the:

• A) investor will lose money on net after paying back the loan.
• B) investor will make money on net after paying back the loan.
• C) saver will make less money on net than the borrower.
• D) borrower will make more money on net than the saver.

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Definitions:

Foot-In-The-Door Phenomenon

A psychological tactic involving getting someone to agree to a small request to increase the chances of them agreeing to a larger request later.

Cognitive Dissonance

The psychological discomfort experienced when holding two or more conflicting thoughts, beliefs, values, or attitudes.

Role-Playing

A teaching or training technique that involves acting out situations or assuming the roles of characters to simulate real-life scenarios.

Cognitive Dissonance Theory

The theory that we act to reduce the discomfort (dissonance) we feel when two of our thoughts (cognitions) are inconsistent. For example, when our awareness of our attitudes and of our actions clash, we can reduce the resulting dissonance by changing our attitudes.