Recently, a neighbor you have known for years won a lottery and received a $250,000 prize

Recently, a neighbor you have known for years won a lottery and received a $250,000 prize. This neighbor decided to invest all of his winnings in a new business venture that he knew only had a five percent chance of success. Previous to this, the neighbor had always been ultra conservative with his money and had refused to invest in this business venture as recently as last week. Which one of the following behaviors most applies to your neighbor's decision to invest in this business venture now?    A.  overoptimisim B.  affect heuristic C.  loss aversion D.  house money E.  get-evenitis Refer to section 22.3

20.

Amy has been investing in stocks so she can accumulate sufficient money to purchase her own home. These savings are currently valued at $82,500. As recently as last month, her savings were worth in excess of $110,000. Today, Amy found the perfect house. She knows she can withdraw her savings to pay on this house and borrow the remaining balance from her father at zero percent interest. However, Amy is refusing now to buy any house until her savings increase in value back to their $110,000 previous valuation. Amy is displaying which one of the following behaviors?    A.  representativeness heuristic B.  loss aversion C.  house money effect D.  underconfidence E.  confirmation bias Refer to section 22.3

21.

Steve purchased a stock last year for $34 a share. The stock increased in value to $36 a share before declining to its current value of $30. Steve has decided to sell the stock, but only if he can receive $34 a share or better. Steve is suffering most from which one of the following behavioral conditions?    A.  representativeness heuristic B.  house money C.  get-evenitis D.  randomness E.  arbitrage reaction Refer to section 22.3

22.

Mike is a stock broker and financial planner. Phil is one of Mike's clients. Phil prefers to meet with Mike just once a year to review his investment portfolio. At their most recent meeting, Phil stated he believes the stock market is going to decline in value over the next six months. Thus, Phil instructed Mike to sell every stock he owns that is currently worth more than what he paid to purchase it. Phil also instructed Mike to retain any stock that would create a capital loss if sold. Phil is displaying the behavior known as:    A.  overconfidence. B.  arbitrage theory. C.  the disposition effect. D.  the house money effect. E.  a confirmation bias. Refer to section 22.3