The Best Way to Measure Adherence to the Objectives of Money

question 25

Multiple Choice

The best way to measure adherence to the objectives of money managers and the financial needs of investors is:

• A)to calculate the total returns on the portfolios that they manage.
• B)to evaluate the risk exposure that the fund manager has accepted.
• C)to calculate the dividend income that the portfolio has achieved.
• D)to calculate the capital gains that the portfolio has achieveD.

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Definitions:

Status Quo Bias

The tendency most people have when making choices to select any option that is presented as the default (status quo) option. Explainable by prospect theory and loss aversion.

Behavioral Economics

A field of economics that examines how psychological, cognitive, emotional, cultural, and social factors affect economic decisions.

Utility

A measure of satisfaction or happiness that a consumer derives from consuming goods or services.

Disutility

The negative utility or dissatisfaction experienced by consumers from consuming a good or engaging in an activity.