Test your expertise in Behavioural Finance

1. Which of the following statements are correct?
a) Behavioural Finance is the science of the irrationality of investors.
b) Behavioural Finance is the science of market anomalies.
c) Behavioural Finance analyses the behaviour of individuals and markets.
d) none of the answers is correct.

2. Who should follow the rule "The younger you are the more risky assets you should hold" if market returns are unpredictable?
a) investors with a constant relative risk aversion
b) loss averse investors
c) none of them

3. An investor is risk-neutral but loss averse. He hates losses by a factor 2 as compared to the pleasure of gains. The investor faces an opportunity that with equal probability gives a return of +27% and -10%. What is the maximum he will be willing to pay for this investment?
a) 10%
b) 7.5%
c) 5%
d) 3.5%
e) 2.5%
f) 1.75%
g) 0%

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