RMI 2302 - FSU Dr. NYCE EXAM 2 WITH COMPLETE SOLUTIONS
Who uses decision making? - ANSWER Persons
Organizations
Government
Individuals use expected ____ - ANSWER Utility
Organizations use expected ____ - ANSWER Value
What entity is able to take on risk regardless of the reward - ANSWER Gov't
What is one of the big problems we have with modeling how decisions are made? -
ANSWER Decisions are made is that they do not explicitly account for biases on the part
of the decision maker
What is Bias? - ANSWER a tendency of mood or view to represent or maintain a partial
view at the expense of alternatives with regard to objects, persons, or groups.
Types of Bias 1 of 5 - ANSWER 1. Age biases
Types of Bias 2 of 5 - ANSWER 2. Cultural biases
Types of Bias 3 of 5 - ANSWER 3. Experience biases
Types of Bias 4 of 5 - ANSWER 4. Gender biases
,Types of Bias 5 of 5 - ANSWER 5. Media biases
Age Biases - ANSWER People in certain age groups tend to interpret
information about risk differently
Cultural Biases - ANSWER Certain culture view of risk differ. (example: religion biases)
Experience Biases - ANSWER 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 - ANSWER (these are not systematic- you cannot say all men or all
women think a certain way)
Media Biases - ANSWER risks that receive high media publicity (murder, terrorism,
kidnapping, etc.) are usually overestimated, while other risks (car accidents, health
risks) are usually underestimated
CAPM - ANSWER The Capital Asset Pricing Model - only reward systemic risk and not
worried about diversifiable risk.
What is Efficient Frontier - ANSWER a graph showing the tradeoff between risk and
reward.
What does the Efficient Frontier line represent? - ANSWER The Efficient Frontier line
represents the optimum mix of risk and return
What is an incentive - ANSWER A motive that drives people to execute an action
Types of incentives: 1 of 7 - ANSWER 1. Material
, Types of incentives: 2 of 7 - ANSWER 2. Moral
Types of incentives: 3 of 7 - ANSWER 3. Natural
What are the types of incentives: 4 of 7 - ANSWER 4. Coercive
What are the types of incentives: 5 of 7 - ANSWER 5. Personal
What are the types of incentives: 6 of 7 - ANSWER 6. Social
What are the types of incentives: 7 of 7 - ANSWER 7.Political
Financial Incentive - ANSWER expect some form of material reward in exchange for
acting in a particular way.
Moral Incentive - ANSWER "do the right thing"
Natural Incentive - ANSWER "curiosity, fear, anger, pain, joy, pursuit of happiness"
Coercive Incentive - ANSWER negative reinforcement
Personal Incentive - ANSWER motivate an individual through their tastes, desires, and
the ambition to achieve remarkable feats.
Social Incentives - ANSWER considers the plight of any individual in a given position
within a given society by considering practices, rules and societal norms
Who uses decision making? - ANSWER Persons
Organizations
Government
Individuals use expected ____ - ANSWER Utility
Organizations use expected ____ - ANSWER Value
What entity is able to take on risk regardless of the reward - ANSWER Gov't
What is one of the big problems we have with modeling how decisions are made? -
ANSWER Decisions are made is that they do not explicitly account for biases on the part
of the decision maker
What is Bias? - ANSWER a tendency of mood or view to represent or maintain a partial
view at the expense of alternatives with regard to objects, persons, or groups.
Types of Bias 1 of 5 - ANSWER 1. Age biases
Types of Bias 2 of 5 - ANSWER 2. Cultural biases
Types of Bias 3 of 5 - ANSWER 3. Experience biases
Types of Bias 4 of 5 - ANSWER 4. Gender biases
,Types of Bias 5 of 5 - ANSWER 5. Media biases
Age Biases - ANSWER People in certain age groups tend to interpret
information about risk differently
Cultural Biases - ANSWER Certain culture view of risk differ. (example: religion biases)
Experience Biases - ANSWER 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 - ANSWER (these are not systematic- you cannot say all men or all
women think a certain way)
Media Biases - ANSWER risks that receive high media publicity (murder, terrorism,
kidnapping, etc.) are usually overestimated, while other risks (car accidents, health
risks) are usually underestimated
CAPM - ANSWER The Capital Asset Pricing Model - only reward systemic risk and not
worried about diversifiable risk.
What is Efficient Frontier - ANSWER a graph showing the tradeoff between risk and
reward.
What does the Efficient Frontier line represent? - ANSWER The Efficient Frontier line
represents the optimum mix of risk and return
What is an incentive - ANSWER A motive that drives people to execute an action
Types of incentives: 1 of 7 - ANSWER 1. Material
, Types of incentives: 2 of 7 - ANSWER 2. Moral
Types of incentives: 3 of 7 - ANSWER 3. Natural
What are the types of incentives: 4 of 7 - ANSWER 4. Coercive
What are the types of incentives: 5 of 7 - ANSWER 5. Personal
What are the types of incentives: 6 of 7 - ANSWER 6. Social
What are the types of incentives: 7 of 7 - ANSWER 7.Political
Financial Incentive - ANSWER expect some form of material reward in exchange for
acting in a particular way.
Moral Incentive - ANSWER "do the right thing"
Natural Incentive - ANSWER "curiosity, fear, anger, pain, joy, pursuit of happiness"
Coercive Incentive - ANSWER negative reinforcement
Personal Incentive - ANSWER motivate an individual through their tastes, desires, and
the ambition to achieve remarkable feats.
Social Incentives - ANSWER considers the plight of any individual in a given position
within a given society by considering practices, rules and societal norms
