Free Practice CFP Questions – Psychology of financial planning

Is there anything better than seeing a familiar question on your CFP exam day? It has been found that a few key questions are repeated in practically most CFP exams for consecutive or alternate years. As a result, if you solve sample CFP past papers from prior years, you will have a good probability of seeing familiar questions in your actual CFP exam. Solving previous years CFP papers will certainly raise your self-assurance.

Solve these ten sample questions from the subject- Psychology of financial planning by CFP Exam Prep by Achieve to increase the probability of seeing more such questions in the CFP test.

Q 1. “People typically naively diversify their investment funds, tending to allocate 1/n of the total to each of n available instruments.” What is described by the statement above?
A. Naive Diversification
B. Base Rate Neglect
C. Inertia
D. Stauts-Quo Bias
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Q 2. “Investors mentally start with an equal split of the amount to be invested among all given categories……and subsequently adjust the allocation (insufficiently) to take the different attractiveness of the categories into account.” Which bias matches the statement above?
A. Anchoring and Adjustment Bias
B. Money Illusion
C. Base Rate Neglect
D. Sunk Cost Fallacy
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Q 3. Assume you purchased Rex Inc. on March 1, 2021 and want to sell it since it increased in price. After a quick thought you recognize that you bought it earlier, in Dec. 2020. Now you decide to keep Rex Inc. instead. How is this behavior called?
A. Overconfidence
B. Disposition Effect
C. Loss Aversion
D. Seasonality
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Q 4. Behavioral Finance argues that___________.
A. Even if security prices are wrong it may be difficult to exploit them.
B. The failure to uncover successful trading rules or traders cannot be taken as proof of market efficiency.
C. Investors are rational.
D. Even if security prices are wrong it may be difficult to exploit them, and the failure to uncover successful trading rules or traders cannot be taken as proof of market efficiency.
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Q 5. If information processing were perfect, many studies conclude that individuals would tend to make_______ decisions using that information due to_________.
A. Less-then-fully rational; behavioral biases
B. Fully rational; behavioral biases
C. Less-than-fully rational; fundamental risk
D. Fully rational; fundamental risk
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Q 6. Which theory argues that investors fear losses more than they value gains, according to the principles of behavioural finance? As a result, investors will often choose the smaller of two potential gains if it avoids a highly probable loss.
A. Expected utility theory
B. Prospect theory
C. Game theory
D. Zero sum theory
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Q 7. The competence of an effective communicator can be judged on the basis of
A. Personality of communication
B. Experience in the field
C. Inter activity with target audience
D. Meeting the needs of target audience
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Q 8. Which of the following are the most Important factors in successful communication? (i) Empathy (ii) Self-awareness (iii) Memory (iv) Positive thinking
A. (i) and (ii) are correct
B. (i), (ii), (iii) are correct
C. All of the above
D. None of the above
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Q 9. Which of the following is not a barrier to effective communication?
A. language
B. defensiveness
C. filtering
D. channel richness
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Q 10. A financial plan is being presented to a client by a CFP® professional today.  The client believes that due to his considerable wealth, there is little he cannot accomplish.  However, the planning process revealed that several of the objectives were impractical. In which stage of the financial planning process are unrealistic goals addressed?
A. Presenting the financial planning recommendations.
B. Obtaining qualitative and quantitative information.
C. Identifying and selecting goals.
D. Analyzing the client’s current course of action.
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Practicing CFP Practice questions with a time constraint allows you to respond to problems more quickly. Solving questions from CFP Exam Prep By Achieve can help you raise your confidence, and also, at the time of the Certified Financial Planner exam, you may feel that you are solving questions from the app itself.