FFC Behavioral Finance and Coaching Techniques 5

Question 1

Which of the following best describes 'herding behavior' in financial markets?

Accepted Answer

Following the crowd's investment decisions regardless of personal analysis

Answer

Herding behavior occurs when investors follow the crowd rather than independent analysis, contributing to market bubbles and crashes.

Question 2

A client says, 'I lost $5,000 in a bad investment, but I don't want to sell because then the loss becomes real.' This thinking reflects:

Accepted Answer

Sunk cost fallacy

Answer

The sunk cost fallacy causes people to continue holding losing investments to avoid 'locking in' losses that have already economically occurred.

Question 3

What is the primary purpose of establishing a 'coaching agreement' at the start of an engagement?

Accepted Answer

To clarify roles, expectations, confidentiality, and the coaching process

Answer

A coaching agreement defines the structure, boundaries, roles, and expectations to ensure both parties understand the nature of the coaching relationship.

Question 4

A client consistently seeks out news articles that confirm their belief that the stock market is about to crash. This exemplifies:

Accepted Answer

Confirmation bias

Answer

Confirmation bias leads people to favor information that supports their pre-existing beliefs and discount information that contradicts them.

Question 5

In the transtheoretical model of behavior change, a client who is actively researching and comparing savings accounts but has not yet opened one is in which stage?

Accepted Answer

Preparation

Answer

The preparation stage involves actively planning and taking small steps toward change without yet implementing the main behavior change.

(FFC) Financial Fitness Coach Certification Practice Test

(FFC) Financial Fitness Coach Certification Practice Test

FFC Behavioral Finance and Coaching Techniques 5