What is meant by a preference reversal?
What will be an ideal response?
Preference reversals arise from the discount weights that people put on the future. These discount weights imply that today gets much more weight than tomorrow, but tomorrow and the day after tomorrow receive the same (or nearly the same) weight.
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The Q-theory of investment is based on high investments being funded by high stock prices of a company
Indicate whether the statement is true or false
At an interest rate of 6%, how much will need to be invested today to have $10,000 in 5 years?
A) $5,000 B) $7,473 C) $10,000 D) $13,382
Your friend Diana tells you that she thinks that her favorite softball team has a 70% chance of winning the next game because that is exactly the winning rate of her team in the last two seasons. This is an example of a(n)
A) objective probability. B) subjective probability. C) risk-averse statement. D) Friedman-Savage preference.
A bank will charge a higher interest rate the:
A. longer is the length of the loan, and the higher the risk of repayment. B. longer is the length of the loan, and the lower the risk of repayment. C. shorter is the length of the loan, and the higher the risk of repayment. D. shorter is the length of the loan, and the lower the risk of repayment.