With final averages on the line, students come into exams with a lot of frustration and test anxiety. Many students know that they have to do well to improve their averages or just to maintain their averages. Using this type of assessment, students feel less frustration and know that their exam has little, if any, bearing on their grade as long as their work is satisfactory.
Students typically have to demonstrate knowledge of the skills that were taught during the semester, so it is a fairly comprehensive assessment. As students have studied the concepts over the course of nine or eighteen weeks, they have confidence in their abilities, and since grades are not really a factor, they bring a level of confidence into the testing situation. The exam is pretty laid back as students have little to worry about and do not have to stress out over a 100 question true/false test, etc.