Personal Finance - Final Exam Study Guide

Front

Sophia often makes quick judgments about people based on their appearance. What is this tendency an example of?

Back

Cognitive bias refers to the systematic patterns of deviation from norm or rationality in judgment, whereby inferences about other people and situations may be drawn in an illogical fashion.

Front

Liam continues to invest in a project despite knowing it will likely fail. What cognitive bias is he experiencing?

Back

Sunk Cost Fallacy

Front

Abigail values a mug she owns more than an identical one in the store. What psychological phenomenon is this?

Back

Endowment Effect

Front

What is Avery experiencing when she feels anxious about missing out on events her friends post about on social media?

Back

Fear of Missing Out

Front

What is it called when people choose something because it's popular, not because they like it?

Back

Herd Mentality

Front

David is deciding between buying a new laptop or going on a vacation. Define the concept that describes his situation.

Back

Trade-off refers to a situation where one must give up something in order to gain something else. It involves balancing different factors or options, often in the context of decision-making, where achieving one goal may require compromising another.

Front

Define Opportunity Cost in the context of choosing between a concert and a movie.

Back

Opportunity cost is the value of the next best alternative that is forgone when making a decision. It represents the benefits that could have been received by choosing a different option.

Front

Avery finds a bank product offering a fixed interest rate for a term, requiring a lump-sum deposit to remain untouched. What is this product called?

Back

Certificate of Deposit (CD)

Front

Define compound interest in this context.

Back

Compound interest is the interest on a loan or deposit calculated based on both the initial principal and the accumulated interest from previous periods.

Front

Define Minimum payment in the context of a credit card statement.

Back

Minimum payment refers to the smallest amount of money that a borrower is required to pay on a loan or credit card balance in a given billing cycle. It is typically a percentage of the total balance or a fixed dollar amount, whichever is greater.