10/11/2018 Learning Management System Question #1 of 18 The tendency for individuals to identify outcomes as gains or losses in the editing phase of decision making would most likely be an example of: A) combination B) codi cation .in C) simpli cation en tre Question #2 of 18 To satis ce means the investor: bo ok c A) takes steps to achieve intermediate goals that help them get closer to the desired goal B) gathers all the relevant information available to them and using heuristics they make the optimally maximizing decision .o m C) achieves intermediate goals that lead to the utility maximizing choice w w Question #3 of 18 Which of the following actions is most likely the result of applying Bayes' theorem of w conditional probability? A fundamental analyst revises a stock recommendation when: A) she revises her in ation expectations B) the rm issues a revised earnings report C) the rm experiences a major re that destroys its production line Question #4 of 18 https://www.kaplanlearn.com/education/dashboard/index/66a9ea0d62bb71ab495925615029a3fd/practice/qbank/24038518/quiz/83413439/print 1/6 10/11/2018 Learning Management System Which of the following steps is least likely to be included in the process of developing heuristicdriven bias? A) Making mistakes B) Reliance on rules of thumb for investment decisions C) Receiving bad advice .in Question #5 of 18 What is the purpose of using Baye's formula in the investment decision making process? en tre A) Incorporate new information into previous forecasts updating those forecasts which aids in the investment decision making process B) Assign probabilities to various outcomes helping the investor gain insight into the range bo ok c of those possible outcomes C) Incorporate some quantitative aspects into the portfolio construction process .o m Question #6 of 18 w w Which of the following statements best de nes satis ce? A) The investor gathers adequate information to make the utility maximizing choice w B) Making a decision in which you are satis ed C) Investors make a satisfactory choice based on the information gathered Question #7 of 18 Assume there are two investments to choose from: investment A has an expected return of 10% and a standard deviation of 15%, and investment B also has an expected return of 10% but its standard deviation is 20% The risk neutral investor would: https://www.kaplanlearn.com/education/dashboard/index/66a9ea0d62bb71ab495925615029a3fd/practice/qbank/24038518/quiz/83413439/print 2/6 10/11/2018 Learning Management System A) not choose investment B because it has a higher level of risk with no additional compensation B) choose either investment A or B since they are not concerned about the level of risk but only with the level of return C) choose investment A because it has a higher return for a given level of risk Question #8 of 18 in Martina Blackwood has not been doing well with her investments She consults Ben Haifen, CFA, for some advice Which of Haifen's following statements indicates that Blackwood is using en tre heuristics? A) Blackwood doesn't like xed-income investments because she doesn't understand them bo ok c B) Blackwood tends to hold onto her losers too long m C) Blackwood's most valuable lessons were learned through her own mistakes .o Question #9 of 18 w w Which of the following statements most correctly describes the shift in focus when moving from a traditional nance to a behavioral nance investment process, and what is the most w pronounced result of this shift? A) The de nition of investor motives shifts to a focus on emotions, and the most pronounced result is that the de nition of risk changes from dispersion-based h b bili h h d bj i ill b li d B) The goal de nition shifts from statistical measures of risk and return to lifestyle-based objectives, and the most pronounced result is that the de nition of risk changes from di i b d h b bili h h d bj i ill b C) The de nition of investor motives shifts to a focus on emotions, and the most li d pronounced result is the development of measures to quantify how emotions a ect the ll i https://www.kaplanlearn.com/education/dashboard/index/66a9ea0d62bb71ab495925615029a3fd/practice/qbank/24038518/quiz/83413439/print 3/6 10/11/2018 Learning Management System Question #10 of 18 Which of the following statements best exempli es the di erence between behavioral and traditional nance? Traditional nance: A) assumes investors make rational decisions whereas behavioral nance attempts to explain why investors act the way they B) views portfolio construction from an historical perspective whereas behavioral nance incorporates modern up-to-date techniques in the portfolio construction process C) does not take into consideration the behavioral aspects of investing which if considered en tre in would lead to better portfolio construction Question #11 of 18 bo ok c The inability of technical trading rules to consistently provide excess returns is most likely used as proof that a market is at least: A) weak-form e cient B) strong-form e cient w w o m C) semi-strong form e cient Question #12 of 18 w The isolation e ect seen in the editing phase of prospect theory is thought to be the result of: A) combination B) cancellation C) dominance Question #13 of 18 When an investor considers wealth fungible: https://www.kaplanlearn.com/education/dashboard/index/66a9ea0d62bb71ab495925615029a3fd/practice/qbank/24038518/quiz/83413439/print 4/6 10/11/2018 Learning Management System A) he will create a layered portfolio with each layer consisting of di erent assets designated to meet a speci c goal B) he may create and hold a single portfolio to meet lifetime consumption C) he will put investments into separate mental accounts Question #14 of 18 in Which of the following statements best describes bounded rationality? decision B) Individuals act rationally within de ned limits en tre A) Individuals recognize they not have all the information necessary to make a rational C) Individuals make rational decisions within the nes of knowing they don’t have all m Question #15 of 18 bo ok c the information or the ability to fully interpret it Basing trading decisions on available public information, Carla Maplewood, CFA, is consistently o able to identify and pro t on mispriced securities Based on her successful trading strategy, we w w would most likely conclude that the market is at best: A) strong-form e cient w B) semi-strong form e cient C) weak-form e cient Question #16 of 18 Which of the following is least likely a heuristic learning process? A) Experimentation B) Trial and error https://www.kaplanlearn.com/education/dashboard/index/66a9ea0d62bb71ab495925615029a3fd/practice/qbank/24038518/quiz/83413439/print 5/6 10/11/2018 Learning Management System C) Research Question #17 of 18 According to prospect theory, investors are generally more concerned with: A) fear of regret, which suggests that the prospect for outperforming a benchmark is the primary concern for these investors .in B) avoiding losses, which suggests that risk of loss may be the best measure of risk Question #18 of 18 bo ok c than risk to these investors en tre C) diminishing marginal utility, which suggests that expected return is more important An individual is presented with a number of choices, with only two outcomes each: one positive and one negative If the individual's selection is a ected by whether only the positive or characteristic known as: o A) mental accounting m negative outcome of each choice is stated, the individual is most likely subject to the behavioral w w B) self-control bias w C) framing https://www.kaplanlearn.com/education/dashboard/index/66a9ea0d62bb71ab495925615029a3fd/practice/qbank/24038518/quiz/83413439/print 6/6 ... the development of measures to quantify how emotions a ect the ll i https://www.kaplanlearn.com/education/dashboard/index/66a9ea0d62bb71ab495925615029a3fd/practice /qbank/ 24 038 518/quiz/ 834 134 39/print... subject to the behavioral w w B) self-control bias w C) framing https://www.kaplanlearn.com/education/dashboard/index/66a9ea0d62bb71ab495925615029a3fd/practice /qbank/ 24 038 518/quiz/ 834 134 39/print... standard deviation is 20% The risk neutral investor would: https://www.kaplanlearn.com/education/dashboard/index/66a9ea0d62bb71ab495925615029a3fd/practice /qbank/ 24 038 518/quiz/ 834 134 39/print 2/6 10/11/2018