Wilbur Rickhiser, a financial advisor, recently told one of his clients: "The biggest mistake you can make is to hold onto a stock for too long in order to avoid a loss
Let's say you bought a stock for $50 per share but that six months later the price fell to $40 after a poor earnings report. Many of my clients in this situation will hold the stock, hoping the price will later rise above $50. In most cases like this the price does not rise and may even fall. You must know when to cut your losses." Which of the following is the best explanation for Rickhiser's advice?
A) People sometimes make mistakes when they buy stocks or when they buy goods and services: they ignore the monetary opportunity costs of their choices.
B) People sometimes buy stocks because other people are buying them or they want to appear to be fashionable.
C) People sometimes make mistakes when they buy stocks because of the endowment effect.
D) People often fail to ignore the sunk costs of their decisions. The cost of the stock bought at $50 per share is a sunk cost.
D
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A) area A B) area B C) area C D) area D E) area E
The real discount rate and the nominal discount rate differ in their treatment of
A) risk. . B) market return. C) inflation. D) expected risk.
The U.S. Treasury both pays and receives almost all of the interest on that portion of the national debt that is held by
a. domestic investors. b. foreign investors. c. government agencies and the Federal Reserve system. d. commercial banks.
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A. floating exchange rate system. B. gold standard. C. fixed exchange rate system. D. managed float exchange rate system.