CHFC UPDATED EXAMS SCRIPT QUESTIONS AND
ANSWERS SURE A+
✔✔equitable distribution - ✔✔Division of marital property based on fairness.
✔✔community-property states - ✔✔States where marital property is generally owned
equally.
✔✔quasi-community-property states - ✔✔States applying community-property
principles to certain property acquired elsewhere.
✔✔closely held business valuation - ✔✔Determining the value of a privately owned
business.
✔✔business appraiser - ✔✔A professional who determines business value.
✔✔capitalization-of-earnings concept - ✔✔A valuation method based on expected
future earnings.
✔✔buyout approach - ✔✔Offsetting retirement or business interests with other assets
rather than dividing them directly.
,✔✔wait-and-see approach - ✔✔Delaying division until future payments or values are
known.
✔✔salary reduction plan - ✔✔An arrangement deferring compensation into future years.
✔✔risk of forfeiture - ✔✔The possibility that deferred compensation benefits may be
lost.
✔✔incentive stock option (ISO) - ✔✔A stock option with favorable tax treatment.
✔✔nonqualified stock option (NSO) - ✔✔A stock option without special tax treatment.
✔✔temporary support - ✔✔Financial assistance paid during divorce proceedings.
✔✔long-term support - ✔✔Ongoing spousal support after divorce.
✔✔child support - ✔✔Financial payments for the support of a child.
✔✔spousal support - ✔✔Payments made by one former spouse to another after
separation or divorce.
✔✔modern portfolio theory (MPT) - ✔✔An investment framework emphasizing
diversification and risk-return tradeoffs.
✔✔capital asset pricing model (CAPM) - ✔✔A model relating expected return to
systematic risk.
✔✔diversification - ✔✔Reducing risk by spreading investments across assets.
✔✔unsystematic risk - ✔✔Risk specific to an individual investment.
✔✔systematic risk - ✔✔Market-wide risk that cannot be diversified away.
✔✔risk premium - ✔✔Additional return expected for taking greater risk.
✔✔efficient market hypothesis (EMH) - ✔✔The theory that markets reflect available
information.
✔✔weak-form - ✔✔The belief that market prices reflect past trading information.
✔✔semi-strong-form - ✔✔The belief that market prices reflect all publicly available
information.
, ✔✔strong-form - ✔✔The belief that market prices reflect all public and private
information.
✔✔market portfolio - ✔✔A portfolio representing all investable assets.
✔✔mutual fund theorem - ✔✔The theory that investors can achieve diversification
through combinations of risk-free assets and market portfolios.
✔✔risk tolerance - ✔✔An individual's willingness and ability to accept investment risk.
✔✔confirmation bias - ✔✔The tendency to seek information that confirms existing
beliefs.
✔✔overconfidence bias - ✔✔The tendency to overestimate one's knowledge or abilities.
✔✔hindsight bias - ✔✔The tendency to believe past events were predictable after they
occur.
✔✔home bias - ✔✔Preference for investments in one's domestic market.
✔✔availability heuristic - ✔✔Making decisions based on easily recalled information.
✔✔return chasing - ✔✔Investing based on recent strong performance.
✔✔recency bias - ✔✔Giving greater importance to recent events than long-term trends.
✔✔hot hand fallacy - ✔✔Belief that recent success will continue.
✔✔dollar-weighted performance - ✔✔Investment return based on the timing and
amount of investor cash flows.
✔✔overreaction - ✔✔Excessive market response to new information.
✔✔momentum effect - ✔✔The tendency of investments with recent strong performance
to continue outperforming.
✔✔mean reversion - ✔✔The tendency for performance to move back toward long-term
averages.
✔✔low-volatility anomaly - ✔✔The observation that low-volatility investments may
outperform on a risk-adjusted basis.
✔✔retirement income planning - ✔✔The process of creating sustainable income during
retirement.
ANSWERS SURE A+
✔✔equitable distribution - ✔✔Division of marital property based on fairness.
✔✔community-property states - ✔✔States where marital property is generally owned
equally.
✔✔quasi-community-property states - ✔✔States applying community-property
principles to certain property acquired elsewhere.
✔✔closely held business valuation - ✔✔Determining the value of a privately owned
business.
✔✔business appraiser - ✔✔A professional who determines business value.
✔✔capitalization-of-earnings concept - ✔✔A valuation method based on expected
future earnings.
✔✔buyout approach - ✔✔Offsetting retirement or business interests with other assets
rather than dividing them directly.
,✔✔wait-and-see approach - ✔✔Delaying division until future payments or values are
known.
✔✔salary reduction plan - ✔✔An arrangement deferring compensation into future years.
✔✔risk of forfeiture - ✔✔The possibility that deferred compensation benefits may be
lost.
✔✔incentive stock option (ISO) - ✔✔A stock option with favorable tax treatment.
✔✔nonqualified stock option (NSO) - ✔✔A stock option without special tax treatment.
✔✔temporary support - ✔✔Financial assistance paid during divorce proceedings.
✔✔long-term support - ✔✔Ongoing spousal support after divorce.
✔✔child support - ✔✔Financial payments for the support of a child.
✔✔spousal support - ✔✔Payments made by one former spouse to another after
separation or divorce.
✔✔modern portfolio theory (MPT) - ✔✔An investment framework emphasizing
diversification and risk-return tradeoffs.
✔✔capital asset pricing model (CAPM) - ✔✔A model relating expected return to
systematic risk.
✔✔diversification - ✔✔Reducing risk by spreading investments across assets.
✔✔unsystematic risk - ✔✔Risk specific to an individual investment.
✔✔systematic risk - ✔✔Market-wide risk that cannot be diversified away.
✔✔risk premium - ✔✔Additional return expected for taking greater risk.
✔✔efficient market hypothesis (EMH) - ✔✔The theory that markets reflect available
information.
✔✔weak-form - ✔✔The belief that market prices reflect past trading information.
✔✔semi-strong-form - ✔✔The belief that market prices reflect all publicly available
information.
, ✔✔strong-form - ✔✔The belief that market prices reflect all public and private
information.
✔✔market portfolio - ✔✔A portfolio representing all investable assets.
✔✔mutual fund theorem - ✔✔The theory that investors can achieve diversification
through combinations of risk-free assets and market portfolios.
✔✔risk tolerance - ✔✔An individual's willingness and ability to accept investment risk.
✔✔confirmation bias - ✔✔The tendency to seek information that confirms existing
beliefs.
✔✔overconfidence bias - ✔✔The tendency to overestimate one's knowledge or abilities.
✔✔hindsight bias - ✔✔The tendency to believe past events were predictable after they
occur.
✔✔home bias - ✔✔Preference for investments in one's domestic market.
✔✔availability heuristic - ✔✔Making decisions based on easily recalled information.
✔✔return chasing - ✔✔Investing based on recent strong performance.
✔✔recency bias - ✔✔Giving greater importance to recent events than long-term trends.
✔✔hot hand fallacy - ✔✔Belief that recent success will continue.
✔✔dollar-weighted performance - ✔✔Investment return based on the timing and
amount of investor cash flows.
✔✔overreaction - ✔✔Excessive market response to new information.
✔✔momentum effect - ✔✔The tendency of investments with recent strong performance
to continue outperforming.
✔✔mean reversion - ✔✔The tendency for performance to move back toward long-term
averages.
✔✔low-volatility anomaly - ✔✔The observation that low-volatility investments may
outperform on a risk-adjusted basis.
✔✔retirement income planning - ✔✔The process of creating sustainable income during
retirement.
