This quiz works best with JavaScript enabled. Home > Finance Theory > Behavioral Finance > Behavioral Finance – Quiz 9 🏠 Homepage 📘 Download PDF Books 📕 Premium PDF Books Behavioral Finance Quiz 9 (20 MCQs) Quiz Instructions Select an option to see the correct answer instantly. 1. What is the primary goal of behavioral finance? A) To develop mathematical models for predicting market behavior. B) To understand and explain real-world financial decision-making. C) To maximize financial returns through risk management. D) None of above. Show Answer Correct Answer: B) To understand and explain real-world financial decision-making. 2. Who developed the Prospect Theory? A) Daniel Kahneman and Amos Tversky. B) Adam Smith. C) J.M. Keynes. D) Milton Friedman. Show Answer Correct Answer: A) Daniel Kahneman and Amos Tversky. 3. What is the tendency to believe that a small sample of outcomes always resembles the long-run distribution of outcomes? A) Law of small numbers. B) Aversion to ambiguity. C) Anchoring and adjustment. D) Recency bias. Show Answer Correct Answer: A) Law of small numbers. 4. In this type of ad consumers are encouraged to live like those they admire, even if they can't afford it. A) Aspirational buying. B) Dog Whistle. C) Bandwagon. D) Feedback Loop. Show Answer Correct Answer: A) Aspirational buying. 5. Who invented mental accounting? A) Kahneman and Tversky. B) Grinder. C) Thaler. D) Shiller. Show Answer Correct Answer: C) Thaler. 6. As per the prospect Theory: A) Pain of losing Rs. 100 is more than the happiness obtained from gain of Rs. 100. B) Pain of losing Rs. 100 is the same as the happiness obtained from gain of Rs. 100. C) Pain of losing Rs. 100 is less than the happiness obtained from gain of Rs. 100. D) None of the above. Show Answer Correct Answer: A) Pain of losing Rs. 100 is more than the happiness obtained from gain of Rs. 100. 7. What is the tendency to sell winners and hold losers known as? A) Loss aversion. B) Confirmation bias. C) Disposition effect. D) Anchoring and adjustment. Show Answer Correct Answer: C) Disposition effect. 8. A seller trying to take advantage of consumers' left digit bias is most likely to charge which of the following prices for one of his products? A) $ 1, 000. B) $ 4, 321. C) $ 1, 234. D) $ 9, 000. E) $ 3, 999. Show Answer Correct Answer: E) $ 3, 999. 9. A RM 100 loss hurts more more than the pleasure of receiving a RM 100 gain reflects which theory A) Prospect Theory. B) Efficient Market Hypothesis (EMH). C) The Accelerator Theory. D) The Neoclassical Theory of Investment. Show Answer Correct Answer: A) Prospect Theory. 10. Which type of decision requires thought, planning, and usually more of our monetary resources? This type of decision usually has a greater risk/consequences. A) Routine decision. B) Major decision. Show Answer Correct Answer: B) Major decision. 11. Believing or dismissing information based on whether it reinforces beliefs we already hold A) Commitment device. B) False statistics. C) Confirmation bias. D) Financial literacy. Show Answer Correct Answer: C) Confirmation bias. 12. In early 2021, investors bid up the price of GameStop stock from about $ 17 per share to roughly $ 300 per share. The price fell sharply shortly thereafter as investors began to sell the stock in large numbers. This is an example of ..... A) A speculative bubble. B) The decoy effect. C) Left digit bias. D) Asymmetric dominance. E) Loss aversion. Show Answer Correct Answer: A) A speculative bubble. 13. It relies onmathematical calculations, economic models and regressionsnot by their emotional interest. A) Behavioral Finance. B) Traditional Finance. Show Answer Correct Answer: B) Traditional Finance. 14. Which of the following represents the core idea behind behavioral finance? A) Quantitative models are the only reliable approach to finance. B) Human behavior and biases can influence financial decision-making. C) Financial markets are always efficient and rational. D) None of above. Show Answer Correct Answer: B) Human behavior and biases can influence financial decision-making. 15. An investor weighs more heavily to potential loss than potential gain. This concept is known as: A) Risk aversion. B) Loss Aversion. C) Risk Averse. D) None of the above. Show Answer Correct Answer: B) Loss Aversion. 16. The social position that a person holds A) Consumer. B) Choice. C) Status. D) Social media power user/influencer. Show Answer Correct Answer: C) Status. 17. If a person gives too much weights to recent information, they make following bias? A) Forecasting bias. B) Recency bias. C) Over confidence bias. D) None of the above. Show Answer Correct Answer: B) Recency bias. 18. Now suppose you have the option to pay your utility bills on an annual rather than a monthly basis. Assume that you have enough money in the bank that you could pay the annual bill (which is simply the sum of all of your monthly bills) without running an overdraft or taking out a loan.If your choices are consistent with Prospect Theory preferences, would you choose to do so? Once again, ignore the impact of any interest that you would earn (or forego). A) Annually. B) Monthly. Show Answer Correct Answer: A) Annually. 19. Prospect theory is ..... A) People treat money differently, depending on factors such as the money's origin and intended use, rather than thinking of it in terms of the "bottom line" as in formal accounting. B) Is a behavioral model that shows how people decide between alternatives that involve risk and uncertainty (e.g. % likelihood of gains or losses). C) When people are asked to judge the probability that an object or event A belongs to class or process B, probabilities are evaluated by the degree to which A is representative of B, that is, by the degree to which A resembles B. D) None of above. Show Answer Correct Answer: B) Is a behavioral model that shows how people decide between alternatives that involve risk and uncertainty (e.g. % likelihood of gains or losses). 20. Which of the following is NOT a characteristic of Freemium Model? A) Offer some core services at no charge. B) Charges a premium if upgrades required. C) Able to pull in customers who are willing to pay eventually. D) All of the above. Show Answer Correct Answer: D) All of the above. ← PreviousNext →Related QuizzesFinance Theory QuizzesBehavioral Finance Quiz 1Behavioral Finance Quiz 2Behavioral Finance Quiz 3Behavioral Finance Quiz 4Behavioral Finance Quiz 5Behavioral Finance Quiz 6Behavioral Finance Quiz 7Behavioral Finance Quiz 8Behavioral Finance Quiz 10 🏠 Back to Homepage 📘 Download PDF Books 📕 Premium PDF Books