This quiz works best with JavaScript enabled. Home > Finance Theory > Behavioral Finance > Behavioral Finance – Quiz 4 🏠 Homepage 📘 Download PDF Books 📕 Premium PDF Books Behavioral Finance Quiz 4 (20 MCQs) Quiz Instructions Select an option to see the correct answer instantly. 1. It is a strategy that can be applied to reduce complex problem solving to more simple judgmental operations A) HEURISTIC. B) BIAS. C) ANOMALY. D) BEHAVIOR. Show Answer Correct Answer: A) HEURISTIC. 2. Which bias helps to explain why people like to go to all-inclusive resorts, where the entire cost of the vacation is paid upfront, and guests don't have to pay for individual meals, drinks, activities etc., even though they know they will probably end up paying more for the all-inclusive than if they went to a regular resort? A) Loss Aversion. B) Moving Reference Points. C) Risk Seeking. D) Risk Aversion. Show Answer Correct Answer: A) Loss Aversion. 3. Why does shopping online make us uniquely happy? A) Our brains release a chemical called dopamine when we order the item and again when we recieve/open it. B) Online shopping is always cheaper than in-store purchases. C) Because you use a credit card, it doesn't feel like you're actually spending money. D) None of above. Show Answer Correct Answer: A) Our brains release a chemical called dopamine when we order the item and again when we recieve/open it. 4. Is the study of the influence of psychology on thebehavior of investors or financial analysts. It also includes thesubsequent effects on the markets. It focuses on the fact thatinvestors are not always rational, have limits to their self-control, andare influenced by their own biases. A) Behavioral Finance. B) Traditional Finance. Show Answer Correct Answer: A) Behavioral Finance. 5. A bat and a ball together cost $ 11. The bat costs $ 10 more than the ball. How much does the ball cost? A) $ 1. B) $ 10. C) $ 0.50. D) $ 1.50. E) There is not enough information. Show Answer Correct Answer: E) There is not enough information. 6. Which social media platform has the biggest influence on buyers? A) Pinterest. B) Instagram. C) Facebook. D) Snapchat. Show Answer Correct Answer: B) Instagram. 7. The person with this strong life value is willing to spend more for craftsmanship and design: A) Inner. B) Social. C) Physical. D) Financial. Show Answer Correct Answer: C) Physical. 8. Traditional Finance assumes that investors are ..... and behavioral finance assumes they are ..... ? A) Rational, Irrational. B) Irrational, Rational. C) Rational, sometimes rational sometimes irrational. D) None of the above. Show Answer Correct Answer: C) Rational, sometimes rational sometimes irrational. 9. Assume you are in a market with weak information efficiency. Should technical analysis work in this environment? A) Yes. B) No. Show Answer Correct Answer: B) No. 10. Which bias is also called 'sunken cost fallacy' A) Status quo bias. B) Mental accounting. C) Escalation of commitment. D) Gambler's fallacy. Show Answer Correct Answer: C) Escalation of commitment. 11. Which of the following statements best describes the concept of "diminishing marginal utility" ? A) The less of an item you have, the less useful or enjoyable it becomes. B) The more of an item you acquire, the less useful or enjoyable it becomes. C) An item's exchange value increases over time. D) An item's use value increases over time. Show Answer Correct Answer: B) The more of an item you acquire, the less useful or enjoyable it becomes. 12. Something that is owed or due (usually refers to money) A) Influence. B) Credit. C) Goals. D) Debt. Show Answer Correct Answer: D) Debt. 13. An example of a "social" money value might be A) Our feelings about money. B) Our personal identity. C) Our health and well-being. D) Our desire for belonging and relatedness with our family. Show Answer Correct Answer: D) Our desire for belonging and relatedness with our family. 14. What is the notion that the price of an asset may not equal its correct value due to barriers to arbitrage? A) Survivorship bias. B) Recency bias. C) Limits to arbitrage. D) Gambler's fallacy. Show Answer Correct Answer: C) Limits to arbitrage. 15. How we handle money is, in part, tied up in our unique family histories, habits, and culture represents this value: A) Inner. B) Social. C) Physical. D) Financial. Show Answer Correct Answer: B) Social. 16. Original Prospect Theory may lead to a violation of stochastic dominance. A) True. B) False. Show Answer Correct Answer: A) True. 17. You found a $ 100 bill. You plan on keeping this money deposited in the bank for 30 years. You have two options listed below. You've taken Mr. Katsev's amazing Personal Finance class, so you choose option B. Why?Option A) You have 100 dollars to deposit. The banks offers you a simple interest rate of 10 percent.Option B) You have 100 dollars to deposit. The bank offers you a compound interest rate of 8 percent. A) It's a better interest rate. B) Compound interest will grow your money faster than simple interest. C) Simple interest will grow your money faster than compound interest. D) None of above. Show Answer Correct Answer: B) Compound interest will grow your money faster than simple interest. 18. A person who has a large, engaged audience or following A) Choice. B) Status. C) Social media power user/influencer. D) None of above. Show Answer Correct Answer: C) Social media power user/influencer. 19. Unlike the traditional finance theories, behavioural finance assumes the investors financial decisions are often inconsistent (several cognitive illusions). A) True. B) False. Show Answer Correct Answer: A) True. 20. Which of the following is a statement of weak form efficiency?I. A) If the markets are efficient in the weak form, then it is impossible to make consistently superior profits by using trading rules based on past returns. B) If the markets are efficient in the weak form, then prices will adjust immediately to public information. C) If the markets are efficient in the weak form, then prices reflect all information. D) None of above. Show Answer Correct Answer: A) If the markets are efficient in the weak form, then it is impossible to make consistently superior profits by using trading rules based on past returns. ← PreviousNext →Related QuizzesFinance Theory QuizzesBehavioral Finance Quiz 1Behavioral Finance Quiz 2Behavioral Finance Quiz 3Behavioral Finance Quiz 5Behavioral Finance Quiz 6Behavioral Finance Quiz 7Behavioral Finance Quiz 8Behavioral Finance Quiz 9Behavioral Finance Quiz 10 🏠 Back to Homepage 📘 Download PDF Books 📕 Premium PDF Books