EXAM 2 RMI 2302 - FSU DR. NYCE QUESTIONS AND
CORRECT DETAILED ANSWERS (VERIFIED ANSWERS)
ALREADY GRADED A+
Who uses decision making ? Ans✓✓✓Individuals
Organizations
Government
Individuals use expected ____ Ans✓✓✓Utility
Organizations use expected ____ Ans✓✓✓Value
What entity is able to take on risk regardless of the reward
Ans✓✓✓Gov't
What is one of the big problems we have with modeling how decisions
are made? Ans✓✓✓Decisions are made is that they do not explicitly
account for biases on the part of the decision maker
What is Bias? Ans✓✓✓an inclination of temperaments or outlook to
present or hold a partial perspective at the expense of alternatives in
reference to objects, people, or groups.
Types of Bias 1 of 5 Ans✓✓✓1. Age biases
,Types of Bias 2 of 5 Ans✓✓✓2. Cultural biases
Types of Bias 3 of 5 Ans✓✓✓3. Experience biases
Types of Bias 4 of 5 Ans✓✓✓4. Gender biases
Types of Bias 5 of 5 Ans✓✓✓5. Media biases
Age Biases Ans✓✓✓People in certain age groups tend to interpret
information about risk differently
Cultural Biases Ans✓✓✓Certain culture view of risk differ. (example:
religion biases)
Experience Biases Ans✓✓✓People who have experienced a low-
probability/high-consequence event tend to overestimate its likelihood,
people who have not experienced one, tend to underestimate (example:
control biases)
Gender Biases Ans✓✓✓(these are not systematic- you cannot say all
men or all women think a certain way)
, Media Biases Ans✓✓✓risks that garner a lot of media attention
(murder, terrorism, kidnapping, etc.) are typically overestimated, while
other risks (car accidents, health risks) tend to be underestimated
CAPM Ans✓✓✓The Capital Asset Pricing Model - only reward
systemic risk and not worried about diversifiable risk.
What is Efficient Frontier Ans✓✓✓a graph that shows the tradeoff
between risk and reward.
What does the Efficient Frontier line represent? Ans✓✓✓Represents the
optimal combination of risk and return
What is an incentive Ans✓✓✓something that motivates individuals to
perform an action
What are the types of incentives: 1 of 7 Ans✓✓✓1. Financial
What are the types of incentives: 2 of 7 Ans✓✓✓2. Moral
What are the types of incentives: 3 of 7 Ans✓✓✓3. Natural
What are the types of incentives: 4 of 7 Ans✓✓✓4. Coercive
CORRECT DETAILED ANSWERS (VERIFIED ANSWERS)
ALREADY GRADED A+
Who uses decision making ? Ans✓✓✓Individuals
Organizations
Government
Individuals use expected ____ Ans✓✓✓Utility
Organizations use expected ____ Ans✓✓✓Value
What entity is able to take on risk regardless of the reward
Ans✓✓✓Gov't
What is one of the big problems we have with modeling how decisions
are made? Ans✓✓✓Decisions are made is that they do not explicitly
account for biases on the part of the decision maker
What is Bias? Ans✓✓✓an inclination of temperaments or outlook to
present or hold a partial perspective at the expense of alternatives in
reference to objects, people, or groups.
Types of Bias 1 of 5 Ans✓✓✓1. Age biases
,Types of Bias 2 of 5 Ans✓✓✓2. Cultural biases
Types of Bias 3 of 5 Ans✓✓✓3. Experience biases
Types of Bias 4 of 5 Ans✓✓✓4. Gender biases
Types of Bias 5 of 5 Ans✓✓✓5. Media biases
Age Biases Ans✓✓✓People in certain age groups tend to interpret
information about risk differently
Cultural Biases Ans✓✓✓Certain culture view of risk differ. (example:
religion biases)
Experience Biases Ans✓✓✓People who have experienced a low-
probability/high-consequence event tend to overestimate its likelihood,
people who have not experienced one, tend to underestimate (example:
control biases)
Gender Biases Ans✓✓✓(these are not systematic- you cannot say all
men or all women think a certain way)
, Media Biases Ans✓✓✓risks that garner a lot of media attention
(murder, terrorism, kidnapping, etc.) are typically overestimated, while
other risks (car accidents, health risks) tend to be underestimated
CAPM Ans✓✓✓The Capital Asset Pricing Model - only reward
systemic risk and not worried about diversifiable risk.
What is Efficient Frontier Ans✓✓✓a graph that shows the tradeoff
between risk and reward.
What does the Efficient Frontier line represent? Ans✓✓✓Represents the
optimal combination of risk and return
What is an incentive Ans✓✓✓something that motivates individuals to
perform an action
What are the types of incentives: 1 of 7 Ans✓✓✓1. Financial
What are the types of incentives: 2 of 7 Ans✓✓✓2. Moral
What are the types of incentives: 3 of 7 Ans✓✓✓3. Natural
What are the types of incentives: 4 of 7 Ans✓✓✓4. Coercive
