CFP Exam (Latest Update 2026) UPDATE!! (Recent
exam) Fully solved & updated 2026 Most TESTED
(2026
Stock index funds and exchange traded funds that track market indice are
subject to which of the following risks?
A. Financial Risk
B. Business Risk
C. Systematic risk
d. Unsystematic risk
E. Diversifiable Risk
C. Systematic Risk
Stock index funds and ETFs that track market indices are subject to
systematic risk or market risk, since they attempt to achieve market-type
returns. All others are examples of unsystematic, or
diversifiable, risk
,An old Wall Street saying is "Cut your losses and let your profits
run." However, investors often do the opposite. It seems that people
are reluctant to admit they made a mistake in purchasing a stock that
subsequently performs poorly. This behavior is most consistent with:
A. Anchoring
B. Herd Mentality
C. Regret Avoidance
D. Representativeness
C. Regret Avoidance
Regret avoidance, also known as the disposition effect, leads
investors to take action or to refuse to act in hopes of minimizing
any regret over their actions or inactions. In investments, it leads
people to sell winners too soon and to hold on to losers too long.
Charlie has noticed that the stock she purchased tends to have a
very tight distributions around the mean but there seems to be a
high probability of "outliers" (multi-deviation returns). this is most
indicative of what type of curve?
A. Positive skewness
B. Leptokurtosis
C. Normal
D. Lognormal
B. Leptokurtosis
Leptokurtic distribution reflects the tendency of observations to fall
closely around the mean creating a peaked distribution at the mean
with thicker tails. If historical returns indicate leptokurtosis then
there is much more reserved variation in periodic returns but higher
probability of large multi-sigma deviations (i.e." fat tails")
, When combining asset classes, an investor begins to receive
diversification benefits when correlation is:
A. Equals -1
B. Less than 1
C. Less than 0
D. Less than or equal to 1
E Equals 0
B. Less than 1
When correlation coefficient is less than 1, an investor begins to
receive diversification benefits. In other words, variability of returns
is reduced. The most diversification benefits are received when
correlation is equal to -1, but diversification benefits begin when
correlation is less than 1.
When considering a diversified portfolio, which of the following is
an appropriate measure of risk?
A. Standard deviation
B. Beta
C. Covariance
D Coefficient of determination
E. Correlation coefficient
B. Beta
Beta is an appropriate measure of risk for a diversified portfolio.
Standard deviation is an appropriate measure of total risk for a non-
diversified portfolio.
exam) Fully solved & updated 2026 Most TESTED
(2026
Stock index funds and exchange traded funds that track market indice are
subject to which of the following risks?
A. Financial Risk
B. Business Risk
C. Systematic risk
d. Unsystematic risk
E. Diversifiable Risk
C. Systematic Risk
Stock index funds and ETFs that track market indices are subject to
systematic risk or market risk, since they attempt to achieve market-type
returns. All others are examples of unsystematic, or
diversifiable, risk
,An old Wall Street saying is "Cut your losses and let your profits
run." However, investors often do the opposite. It seems that people
are reluctant to admit they made a mistake in purchasing a stock that
subsequently performs poorly. This behavior is most consistent with:
A. Anchoring
B. Herd Mentality
C. Regret Avoidance
D. Representativeness
C. Regret Avoidance
Regret avoidance, also known as the disposition effect, leads
investors to take action or to refuse to act in hopes of minimizing
any regret over their actions or inactions. In investments, it leads
people to sell winners too soon and to hold on to losers too long.
Charlie has noticed that the stock she purchased tends to have a
very tight distributions around the mean but there seems to be a
high probability of "outliers" (multi-deviation returns). this is most
indicative of what type of curve?
A. Positive skewness
B. Leptokurtosis
C. Normal
D. Lognormal
B. Leptokurtosis
Leptokurtic distribution reflects the tendency of observations to fall
closely around the mean creating a peaked distribution at the mean
with thicker tails. If historical returns indicate leptokurtosis then
there is much more reserved variation in periodic returns but higher
probability of large multi-sigma deviations (i.e." fat tails")
, When combining asset classes, an investor begins to receive
diversification benefits when correlation is:
A. Equals -1
B. Less than 1
C. Less than 0
D. Less than or equal to 1
E Equals 0
B. Less than 1
When correlation coefficient is less than 1, an investor begins to
receive diversification benefits. In other words, variability of returns
is reduced. The most diversification benefits are received when
correlation is equal to -1, but diversification benefits begin when
correlation is less than 1.
When considering a diversified portfolio, which of the following is
an appropriate measure of risk?
A. Standard deviation
B. Beta
C. Covariance
D Coefficient of determination
E. Correlation coefficient
B. Beta
Beta is an appropriate measure of risk for a diversified portfolio.
Standard deviation is an appropriate measure of total risk for a non-
diversified portfolio.
