An investor needs cash to pay some hospital bills. He is willing to use his dividend income to pay the bills, but he will not sell any stock to do so. He is engaging in ________.

Question

Quizplus · Accepted Answer

The investor is engaging in mental accounting, where he is segregating his dividend income for a specific purpose and not willing to sell any stock for that purpose. It is an example of mental accounting, where he is assigning a specific purpose to his cash flows.

An Investor Needs Cash to Pay Some Hospital Bills