Easy Behavior Finance Question

CFA Level III
#1

James Wolfowit, CFA, has just acquired tow clients: jack Lake and Brenda Fromm. Lake is young and has just started investing. He has very lofty goals and approaches investing with the idea of becoming rich as quickly as possible. Fromm has been investing for many years. during an initial consultation, Fromm describes to Wolfowitz how she carefully created her portfolio to first cover her children’s eucation needs with high grade bonds, then her own retirement needs with high grade equities, and then her goal of a vacation home with samall cap stocks. Based upon this information, we would expect that: A Both lake and Fromm will want to invest in low risk securities. B. Both Lake and Fromm will want to ivnest in speculative securities. C. Fromm will want to invest in low risk securities and Lake will want to invest in speculative securities. i think both B and C are correct

#2

C? Fromm is following pyramid strategy and first like to invest in risk free and then once it completes he will go for risky. Fromm doesnt want to invest in speculative securities right away

#3

C

#4

C

#5

B

#6

C

#7

A: The younger one will want low risk securities for diversification purposes too.

#8

B: As Lake is Spontaneous investor and Fromm is on the top of her pyramid !!

#9

B, for same reason as rp77

#10

B - same reasonign as rp77

#11

B - same reasoning as rp77

#12

copy paste ^

#13

why is he on top of the pyramid?

#14

B. same as sparty.

#15

answer? i sd b too

#16

answer? i said b too

#17

A is totally out for me BTW B and C C since From is a pyramid investor…official answer and reason please

#18

i’m pretty sure answer is B. It’s in the Schweser notes. Rationale - he is young and cool and risky, so he would invest in speculative securities. She is old and not so cool, but she built her portfolio and took care of her and her children’s needs…now she wants a vacation home (top-tier in pyramid), so she funds them with speculative securities in hopes to attain it.

#19

mp2438 Wrote: ------------------------------------------------------- > i’m pretty sure answer is B. It’s in the Schweser > notes. > > Rationale - he is young and cool and risky, so he > would invest in speculative securities. > She is old and not so cool, but she built her > portfolio and took care of her and her children’s > needs…now she wants a vacation home (top-tier in > pyramid), so she funds them with speculative > securities in hopes to attain it. MP what you said makes sense …didnt see that she had already taken care of her base needs …still only inference is from the statement “Fromm has been investing for many years”

#20

The education/retirement she talks about “covered”; her vacation home is a “goal”.