FP511 CFP Module 2 exam with correct
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detailed answers |
Behavioral |finance: |- |correct |answer |is |a |field |of |study |that |relates |behavioral |and |cognitive |
psychology |to |financial |planning |and |economics |in |an |attempt |to |understand |why |people |act |
irrationally |during |the |financial |decision-making |process.
Risk |tolerance: |- |correct |answer |is |the |tradeoff |that |clients |are |willing |to |make |between |
potential |risks |and |rewards, |with |some |probability |of |negative |outcomes.
Risk |preference: |- |correct |answer |is |the |attitude |a |client |has |toward |financial |risks.
Risk |perception: |- |correct |answer |is |the |subjective |judgment |that |clients |make |when |they |are |
asked |to |describe |and |evaluate |the |risk |of |financial |decisions
Risk |capacity: |- |correct |answer |which |also |influences |a |client's |risk |assessment, |is |the |degree |
to |which |a |client's |financial |resources |can |mitigate |risks.
Risk |Literacy: |- |correct |answer |a |client |to |comprehend |and |act |upon |information |regarding |
financial |risks
Psychological |profiles: |- |correct |answer |Understanding |the |unique |profile |of |a |client |will |likely |
allow |the |planner |to |accurately |predict |the |way |the |clients |will |perceive |and |judge |any |
recommendations.
Perception: |- |correct |answer |is |an |individual's |personal |awareness |of |things, |people, |events, |or
|ideas.
Judgment: |- |correct |answer |involves |making |conclusions |about |what |has |been |perceived.
, Three |types |of |learning |styles: |- |correct |answer |visual, |auditory, |kinesthetic
Attitudes: |- |correct |answer |reflect |a |person's |opinions, |values, |and |wants
Beliefs: |- |correct |answer |are |a |type |of |attitude |because |they |reveal |the |understanding |of |some
|aspect |of |a |person's |life
Values: |- |correct |answer |Attitudes |and |beliefs |for |which |a |person |feels |strongly |are |considered |
values, |and |represent |what |a |person |believes |to |be |right.
Context: |- |correct |answer |A |client's |profile |is |largely |influenced |by |context, |which |includes |past
|history |or |any |conditions |that |presently |exist.
Illusion |of |control |bias: |- |correct |answer |exists |when |clients |believe |they |can |control |or |affect |
outcomes |of, |say, |the |market |when |they |cannot.
Money |illusion: |- |correct |answer |is |the |misunderstanding |people |have |in |relating |nominal |
rates |or |prices |with |real |(inflation-adjusted) |rates |or |prices. |With |this |bias, |individuals |have |a |
tendency |to |think |one |dollar |has |the |same |value |today, |tomorrow, |and |into |the |future, |
without |considering |inflation.
Conservatism |bias: |- |correct |answer |occurs |when |individuals |initially |form |a |rational |view |but |
fail |to |change |that |view |as |new |information |becomes |available.
Confirmation |bias: |- |correct |answer |occurs |when |individuals |look |for |new |information |or |
distort |new |information |to |support |an |existing |view
Representativeness |bias: |- |correct |answer |is |the |tendency, |when |considering |choices |when |
making |a |decision, |to |recall |a |past |experience |similar |to |the |present |decision-making |situation |
and |assume |one |is |like |the |other.
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detailed answers |
Behavioral |finance: |- |correct |answer |is |a |field |of |study |that |relates |behavioral |and |cognitive |
psychology |to |financial |planning |and |economics |in |an |attempt |to |understand |why |people |act |
irrationally |during |the |financial |decision-making |process.
Risk |tolerance: |- |correct |answer |is |the |tradeoff |that |clients |are |willing |to |make |between |
potential |risks |and |rewards, |with |some |probability |of |negative |outcomes.
Risk |preference: |- |correct |answer |is |the |attitude |a |client |has |toward |financial |risks.
Risk |perception: |- |correct |answer |is |the |subjective |judgment |that |clients |make |when |they |are |
asked |to |describe |and |evaluate |the |risk |of |financial |decisions
Risk |capacity: |- |correct |answer |which |also |influences |a |client's |risk |assessment, |is |the |degree |
to |which |a |client's |financial |resources |can |mitigate |risks.
Risk |Literacy: |- |correct |answer |a |client |to |comprehend |and |act |upon |information |regarding |
financial |risks
Psychological |profiles: |- |correct |answer |Understanding |the |unique |profile |of |a |client |will |likely |
allow |the |planner |to |accurately |predict |the |way |the |clients |will |perceive |and |judge |any |
recommendations.
Perception: |- |correct |answer |is |an |individual's |personal |awareness |of |things, |people, |events, |or
|ideas.
Judgment: |- |correct |answer |involves |making |conclusions |about |what |has |been |perceived.
, Three |types |of |learning |styles: |- |correct |answer |visual, |auditory, |kinesthetic
Attitudes: |- |correct |answer |reflect |a |person's |opinions, |values, |and |wants
Beliefs: |- |correct |answer |are |a |type |of |attitude |because |they |reveal |the |understanding |of |some
|aspect |of |a |person's |life
Values: |- |correct |answer |Attitudes |and |beliefs |for |which |a |person |feels |strongly |are |considered |
values, |and |represent |what |a |person |believes |to |be |right.
Context: |- |correct |answer |A |client's |profile |is |largely |influenced |by |context, |which |includes |past
|history |or |any |conditions |that |presently |exist.
Illusion |of |control |bias: |- |correct |answer |exists |when |clients |believe |they |can |control |or |affect |
outcomes |of, |say, |the |market |when |they |cannot.
Money |illusion: |- |correct |answer |is |the |misunderstanding |people |have |in |relating |nominal |
rates |or |prices |with |real |(inflation-adjusted) |rates |or |prices. |With |this |bias, |individuals |have |a |
tendency |to |think |one |dollar |has |the |same |value |today, |tomorrow, |and |into |the |future, |
without |considering |inflation.
Conservatism |bias: |- |correct |answer |occurs |when |individuals |initially |form |a |rational |view |but |
fail |to |change |that |view |as |new |information |becomes |available.
Confirmation |bias: |- |correct |answer |occurs |when |individuals |look |for |new |information |or |
distort |new |information |to |support |an |existing |view
Representativeness |bias: |- |correct |answer |is |the |tendency, |when |considering |choices |when |
making |a |decision, |to |recall |a |past |experience |similar |to |the |present |decision-making |situation |
and |assume |one |is |like |the |other.
