29 Apr Behavioral Finance- FIN 6451. Answer all the follo
Behavioral Finance- FIN 6451. Answer all the following three (3) questions, worth 300 points or 30% of your total class grade. Score for each question is shown in the parentheses at the end of each question. For qualitative questions, maximum allowed pages are also given at the end of each question.2. At submission time, you can ONLY submit a maximum of TWO (2) files; one Excel file to be used ONLY for quantitative questions that naturally require calculations, and one Word file for ALL written/non-quantitative/qualitative responses. Warning: If you submit more than two (2) files as stated,QUESTION 1.In your basic finance/investment class you learned about risk according to the traditional finance theory; which is based on market efficiency. In this class however you learned new concepts, models, and theories about risk that were not taught in your previous finance class or classes. Shefrin and Ackert & Deaves, as well as the class discussions and assignments, did a fine job in helping you to learn about risk from the behavioral finance perspective. With this brief background, below is a three-part question for this segment of the exam.Part I. Briefly summarize your understanding of risk according to the traditional finance theory as alluded to in above. You may state any theory, formula, or definition in a brief manner using the standard finance terminology. Here I just want to see what you know about this topic so it is important to display your knowledge on the issue.Part II. Explain in details what else you learned about risk in this class that was not covered in part I in above. Make sure you stay on the topic which is the behavioral aspects of risk. This part is the main part of the question and tests your knowledge of risk at this point in this class.Part III. Based on parts I and II in above, clearly explain how your cumulative knowledge of risk learned up to this point can help you to become a better decision maker; that is:a. A better investment professional, andb. A better corporate decision maker/manager.Note: Points will be taken off for responses that lack organization and order.Maximum pages: 4 pages, double-space, size 12Total Grade: 100QUESTION 2.This question tests your understanding of Retirement Saving/Planning in light of your learned knowledge of behavioral finance and related discussions in the present course. Answer the following questions in the order given and in needed details.A. What are the specific risks associated with retirement saving and planning? In your responses make sure you look at risk from both a traditional finance as well as a behavioral finance perspective.B. What can you, as a future retiree, do about the above risks that you just listed? In other words, and as you plan and save for your retirement, how can you manage and mitigate the above-listed risks? In your answers make sure to include and explain any available model(s) that behavioral finance academics and professionals have offered.C. How much control do you think you have over your own retirement savings? In other words, after all said and done in above, do you really think you can reasonably count on your retirement savings at the time of your retirement? If yes, explain how and why. If no, explain your thoughts and the concerns that you may have regarding the issue. Be organized in responding. This simply means present your responses in an orderly and organized fashion. In other words, you do not want to jump around in your responses. Points will be taken off for not being organized in responding to the questions asked.Maximum pages allowed: four pages, double-space, size 12; reference page(s) does not count in the maximum page limit.Total Grade: 100QUESTION 3.By expanding upon Mary Meeker’s work on eBay valuation as discussed in chapter two of your textbook, Shefrin discusses in details how heuristics, framing, and other psychological factors can affect the way managers and analysts value companies. He also discusses how calculation of Free Cash Flows could be manipulated and possibly misused when it comes to arriving at a price for a given stock.In this question, I want to test your understanding of what exactly Shefrin tries to accomplish in chapter two through both qualitative and quantitative arguments. To do that, consider that you have been invited to present a workshop before a group of analysts and managers; and the topic of your discussion is similar to the discussions presented in chapter two of Shefrin on valuation which involves both concepts and numbers. I want you to consider and expand upon both the qualitative and quantitative discussions that were used in that chapter. In this question and based on what was stated in above, your job then is to prepare and submit to me the needed lecture notes along with any related calculations that you would use in your presentation. Your submission should then contain a fair amount of conceptual/qualitative materials along with some supporting quantitative analysis and/or examples. For such a purpose, feel free to use and build upon the tables and numerical examples that are discussed in chapter 2. Your quantitative analysis would certainly help the attendees to better understand the points that you want to make in your presentation. For the conceptual portion of your submission use one (1) Word file and for the quantitative portion use one (1) Excel file.Note: Points will be taken off for responses that lack organization and order.Maximum pages: 4 pages, double-space, size 12 for your Word file. There is no page limit for using tables or Excel sheets/tabsTotal Grade: 100 (50 points for the qualitative portion in Word and 50 points for the quantitative portion in Excel)End of the Final Exam!
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