PART A: Suppose that you are given 2 scenarios: Scenario #1 Given that you already have $1000, you have the following 2 choices:

(a) You can receive another $500 for sure. (b) You can flip a fair coin. If the coin flip comes up heads, you get another $1,000. But

if it comes up tails, you get nothing.

Scenario #2 Given that you already have $2,000. You have the following 2 choices:

(c) You can lose $500 for sure. (d) You can flip a fair coin. If the coin flip comes up heads, you lose $1,000. But if it

comes up tails, you lose nothing.

In an experiment, researchers have found that 85% of the people participated in scenario #1 select option (a) whereas 70% of the people asked in scenario #2 select option (d) even though the average amount of money that you can expect to get, regardless of the options is $1,500 (and effectively, both scenarios are IDENTICAL in terms of the outcome). Answer the following:

1. (i) What type of behavioral bias does this example represent?

2. (ii) In your own words, explain what this behavioral bias means in plain English such that

   an educated college student (not necessarily in business or Finance) can understand and follow your line of thoughts.

PART B: Your friend Karma Wilson is a typical college student. She works part time while going to school full time pursuing a degree in Finance. Karma makes decent money as a waitress at Butchers Union and responsibly saves some of her earnings for rainy day fund. However, when it comes to tax refund time, Karma typically uses her tax refund for trips to Four Winds casino or to splurge on a tech gizmo. Answer the following:

1. (i) What type of behavioral bias does this example represent?

2. (ii) In your own words, explain what this behavioral bias means in plain English such that

   an educated college student (not necessarily in business or Finance) can understand and follow your line of thoughts.