Lesson 2 Flashcards
Quiz
All of the following statements about risk are true EXCEPT
A. Risk capacity is the degree of risk that a client can or should take
B. Risk tolerance is the degree of risk that a client feels comfortable taking
C. Financial planners generally assume that their clients risk tolerance level is based on an objective
data without first consulting their client
D. Work history, income volatility, and asset allocation can be used as data when determining a clients
risk capacity
C. Financial planners generally assume that their clients risk tolerance level is based on an objective
data without first consulting their client
Quiz
The idea that the counselor must identify behavioral excesses and inadequacies and try to manipulate these forces to change your clients behavior and thought process follows which school of thought?
A. The developmental school of thought
B. The Humana humanistic school of thought
C. The Cognitive– behavioral school of thought
C. The Cognitive– behavioral school of thought
Quiz
Which school of thought has its origin in and was influenced by Freudian psychoanalytic theory
A. The developmental school of thought
B. The Humana humanistic school of thought
C. The cognitive-behavioral school of thought
C. The cognitive-behavioral school of thought
Quiz
All of the following are true regarding financial advisors EXCEPT
A. Advisor should strive to be active listeners throughout their sessions with clients
B. Advisor should only use open questions during their client meetings
C. It is important for advisors to understand their clients values and attitudes
D. Nonverbal clues, or body language, can communicate feelings and attitudes between clients and
advisors
B. Advisor should only use open questions during their client meetings
Quiz
All of the following are principles of modern portfolio theory (MPT) EXCEPT
A. Markets are inefficient
B. Returns are determined by risk
C. Investors are rational
D. The main-variance portfolio theory governs
A. Markets are inefficient
Quiz
Which of the following best describes the cognitive bias called “hurding”?
A. Individuals mimic the actions or decisions of a larger group, even though the individuals may not have necessarily agreed with those actions or decisions
B. Investors have a propensity to believe that they can out perform the market on their beliefs or skills
C. People attach their thoughts to a reference point, even though the reference point may be irrelevant and may not be pertinent to the issue in question
D. People tend to filter information and focus on information that supports their opinions
A. Individuals mimic the actions or decisions of a larger group, even though the individuals may not have necessarily agreed with those actions or decisions
End of Chapter Questions
Which of the following is (are) consistent with the Humanistic Paradigm?
- The majority of Humanistic theories view clients as experts on themselves.
- The alliance between the counselor and client is extremely important for humanistic counselors and is the basis of the treatment or plan of action.
- There needs to be a professional distance between the client and adviser where the adviser should stay close to discussing numbers and data with the client.
a. 1 only.
b. 1 and 2.
c. 1 and 3.
d. All of the above.
b. 1 and 2.
Statements 1 and 2 are key components to the Humanistic Paradigm discussed in the chapter.
Statement 3 is incorrect because the Humanistic Paradigm embraces a close, friendly relationship between the client and adviser, such that the client will open up and achieve congruence.
End of Chapter Questions
Which of the following is NOT a premise in Traditional Finance?
A. Markets are Efficient.
B. Investors are Rational.
C. Markets are Inefficient.
D. The Mean-Variance Portfolio Theory Governs.
C. Markets are Inefficient.
Markets are inefficient is NOT a premise in Traditional Finance. The premise in Traditional Finance
is just the opposite, that markets are efficient and stock prices are equal to the fundamental or intrinsic value of the stock.
End of Chapter Questions
Which of the following are important in nonverbal communication and behavior?
- Body positioning.
- Body movement.
- Voice tone.
- Voice pitch.
A. 1 only.
B. 1 and 2.
C. 1 and 3.
D. All of the above
D. All of the above
All of the above are important in nonverbal communication and behavior.
End of Chapter Questions
Which of the following investors would apply in the realm of Behavioral Finance?
A. A rational investor who considers his or her portfolio as a whole at all times.
B. An investor not moved by emotion or biases.
C. An investor who at times is subject to emotion or cognitive biases.
D An investor guided by risk calculations based on Beta alone.
C. An investor who at times is subject to emotion or cognitive biases.
The normal investor is one who can be subject to emotions or cognitive biases. Option a notes a rational investor, which is a hypothetical machine-like person in Traditional Finance. Option b involves a person not moved by emotion or biases who would apply to the realm of Traditional Finance. An investor guided by Beta calculations alone, would not apply to the premises of Behavioral Finance.
End of Chapter Questions
Which of the following choices is false as to open or closed questions?
A. Open or closed questions are both effective tools for the financial adviser.
B. An open question starts with the phrase “Isn’t it true that …”
C. A closed question is narrow and can be answered with a word or two.
D. A closed question seeks a response that is very specific.
B. An open question starts with the phrase “Isn’t it true that …”
A closed question may start with the phrase “Isn’t it true that …,” allowing for a yes or no answer.
Quiz
Which of the following is most likely the beginning of a closed Question?
A. “Why did you….?
B. “How did you…?
C. “ Is it true that…?
D. None of the above are closed questions
C. “ Is it true that…?
Quiz
Seeking information that supports the beliefs you already have is the definition of which of the following?
A. The Disposition effect
B. Confirmation Bias
C. Overconfidence
D. Representative heuristic
B. Confirmation Bias
Which of the following is true in terms of biases that affect a rational investor as described in traditional finance?
A the rational investor is affected by the deposition affect
B. the rational investor is affected by the overreaction bias
C. the rational investor is affected by anchoring
D. Intraditional finance theory, a rational investor is not affected by biased
D. in traditional finance theory, a rational investor is not affected by bias
Quiz
All of the following are important and positive aspects of nonbehavioral behavior with clients except
A. Maintaining eye contact
B. Making open and reassuring jesters
C. Calling prospective clients by their formal title
D. Expressing interest by taking notes and nodding when listening
C. Calling prospective clients by their formal title
