RMI2302 Exam 2 Practice Questions
Incentive - ✔✔Bill's Bookstore needs to restock textbooks for the upcoming semester.
Bill, the owner, decides to offer a monetary bonus based on how many books an
individual restocks. 10 textbooks = $1 bonus. This is an example of a(n):
Age Bias
Positive Reinforcement
Risk/Reward
Incentive
Overestimate future risk of a similar occurrence - ✔✔People who live through a major
disaster will likely:
Be objective in assessing future risk
Underestimate future risk of a similar occurence
Feel relieved, because lightning never strikes twice in the same location
Overestimate future risk of a similar occurrence
%
Subjective - ✔✔A bias can be described by which of the following views
Objective
Subjective
Tangible
Continuis
True - ✔✔Age biases occur when people in different age groups interpret information
about risk differently. T/F
Experience - ✔✔People who have experienced a low-probability/high-consequences
event tend to overestimate its likelihood. What type of bias does this describe?
Experience
Age
Probability
,Projection
Incentive - ✔✔What motivates an individual to make perform an action?
Risk
Reward
Bias
Incentive
False - ✔✔Individuals and organizations measure risk/return with expected utility. T/F
The trade-off between risk and reward - ✔✔The skill of critical decision making
requires an understanding of:
State Laws
Case law
The trade-off between risk and reward
The family medical leave act
%
Organizational Level Incentives - ✔✔A company has noticed employees taking a lot of
sick time off around the flu season. They are concerned with the overall health of their
employees and don't want them to catch/spread the flu. The company begins offering
free flu shots for the employee and up to 4 family members. This is an example of:
Moral Biases
Individual Level incentives
Organizational Level Incentives
Financial Biases
Government Level Incentives
Long term cash flows are less valuable - ✔✔As discount rates become higher:
Long term cash flows are more valuable
Long term cash flows are less valuable
The National Deficit is reduced
, None of the above will occur
Discounting - ✔✔Which of the following is a way organizations utilize opportunity cost
in their calculations?
Discounting
Estimating
Simulating
Projecting
Coercive - ✔✔Eric must keep a B average, or else lose his starting position on the
basketball team. What type of incentive best describes this situation?
Financial
Coercive
Moral
Natural
%
Political incentives often increase the discount rate - ✔✔Political incentives often do
what to the discount rate?
Political incentives often increase the discount rate
Political incentives often decrease the discount rate
Political incentives have no effect on the discount rate
Not enough information is known
Governments - ✔✔Which entity is most likely to take additional risk without regard to
the amount of reward associated with it?
Individuals
Corporations
Governments
Sole Proprietorships
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