FHCE 3200 Module 1 Exam Questions
And Answers
Perceived Competence - Answer how well someone can access, understand, and apply
financial information
Measured Competence - Answer A person's ability to access, understand, and apply
financial information when measured on a scale
Financial Capability - Answer an individual's capacity based on knowledge, skills, and
access, to manage financial resources effectively
The Concept of 'Lenses' in the financial world: - Answer -risk tolerance
-knowledge (edu., training, experience)
-current environment
-recent events
Why is financial literacy important? - Answer -babyboomers approaching retirement
-increased responsibility in saving for one's retirement/managing finances
-increasing longevity
-mandatory auto insurance, health insurance, etc.
-complex financial decisions are more individualized than institutionalized.
Characteristics of Financially Capable Individuals: - Answer -self regulation (includes
self-efficacy, self control)
-experience
-education
-interest
-involvement in decisions
-altruism
Pathways to wealth: - Answer -keep good records
-spend less than earned
-maintain appropriate risk management strategies
-save money regularly
, Assets listed in increasing order based on risk: - Answer -savings accounts
-US gov. bonds
-corporate bonds
-stocks (highest risk, highest rate of returns!)
What increases financial risk tolerance? - Answer -experience in the markets
-educational attainment
-age (risk tol. inc. with age)
-gender (men = impatient)
-psychosocial factors
True or False: Risk taking behavior in other areas of your life does not mean that you are
also financially risk taking? - Answer TRUE
True or False: Risk tolerance can change. - Answer TRUE
How is risk measured? - Answer perceived risk tolerance
measured risk tolerance (questionnaire in class)
Risk Tolerance & Wealth - Answer -a person's ability to take risk determines in essence
how much wealth she is going to accumulate
-a person's risk preference determines whether he is willing to invest in a certain asset
class
True or False: people are quite terrible at perceiving the riskiness of an asset class. -
Answer TRUE
How do you know your Human Capital? - Answer -what are you worth?
-net worth = total assets-total debt
-your worth from a behavioral finance perspective:
-total net worth = net worth + value of human capital
Human Capital: - Answer -income, educational attainment, health
-your ability to work, learn, earn, & make wise financial decisions
-your skills, knowledge, and capacity
Human capital increases with: - Answer education
training
And Answers
Perceived Competence - Answer how well someone can access, understand, and apply
financial information
Measured Competence - Answer A person's ability to access, understand, and apply
financial information when measured on a scale
Financial Capability - Answer an individual's capacity based on knowledge, skills, and
access, to manage financial resources effectively
The Concept of 'Lenses' in the financial world: - Answer -risk tolerance
-knowledge (edu., training, experience)
-current environment
-recent events
Why is financial literacy important? - Answer -babyboomers approaching retirement
-increased responsibility in saving for one's retirement/managing finances
-increasing longevity
-mandatory auto insurance, health insurance, etc.
-complex financial decisions are more individualized than institutionalized.
Characteristics of Financially Capable Individuals: - Answer -self regulation (includes
self-efficacy, self control)
-experience
-education
-interest
-involvement in decisions
-altruism
Pathways to wealth: - Answer -keep good records
-spend less than earned
-maintain appropriate risk management strategies
-save money regularly
, Assets listed in increasing order based on risk: - Answer -savings accounts
-US gov. bonds
-corporate bonds
-stocks (highest risk, highest rate of returns!)
What increases financial risk tolerance? - Answer -experience in the markets
-educational attainment
-age (risk tol. inc. with age)
-gender (men = impatient)
-psychosocial factors
True or False: Risk taking behavior in other areas of your life does not mean that you are
also financially risk taking? - Answer TRUE
True or False: Risk tolerance can change. - Answer TRUE
How is risk measured? - Answer perceived risk tolerance
measured risk tolerance (questionnaire in class)
Risk Tolerance & Wealth - Answer -a person's ability to take risk determines in essence
how much wealth she is going to accumulate
-a person's risk preference determines whether he is willing to invest in a certain asset
class
True or False: people are quite terrible at perceiving the riskiness of an asset class. -
Answer TRUE
How do you know your Human Capital? - Answer -what are you worth?
-net worth = total assets-total debt
-your worth from a behavioral finance perspective:
-total net worth = net worth + value of human capital
Human Capital: - Answer -income, educational attainment, health
-your ability to work, learn, earn, & make wise financial decisions
-your skills, knowledge, and capacity
Human capital increases with: - Answer education
training
