FINC 3610 FINAL EXAM REAL EXAM 2026 | QUESTIONS
AND CORRECT ANSWERS (DETAILED ANSWERS) |
VERIFIED ANSWERS | JUST RELEASED
Q: How does a margin loan work? ---------CORRECT ANSWER----------------
-You borrow money from your broker to buy stock using your existing
securities as collateral; you pay interest on the loan.
Q: What can happen if the value of stock drops with a margin loan? -----
----CORRECT ANSWER-----------------Your equity falls, you may receive a
margin call, and the broker can force-sell holdings.
Q: What can happen if the value of stock rises with a margin loan? -------
--CORRECT ANSWER-----------------Your return on equity is amplified;
leverage increases gains.
Q: Major risk of buying stock with a margin loan? ---------CORRECT
ANSWER-----------------Losses are magnified and can exceed your cash
investment; margin calls possible.
,Q: Active vs Passive investing? ---------CORRECT ANSWER-----------------
Active tries to beat the market; passive tracks an index at low cost.
Q: Argument for Passive Investing? ---------CORRECT ANSWER--------------
---Lower fees and difficulty of beating the market.
Q: Argument for Active Investing? ---------CORRECT ANSWER---------------
--Potential to outperform by exploiting mispricing.
Q: Percent of active funds that beat passive long-term? ---------CORRECT
ANSWER-----------------A small minority—usually well under 50%.
Q: Textbook definition of valuing stocks? ---------CORRECT ANSWER------
-----------Present value of expected future cash flows.
Q: Two main stock cash flows? ---------CORRECT ANSWER-----------------
Dividends and future sale price.
, Q: Why stock pricing harder than bonds? ---------CORRECT ANSWER------
-----------Stock cash flows and growth are uncertain, no fixed maturity.
Q: Estimate dividend growth rate? ---------CORRECT ANSWER---------------
--Historical growth, analyst forecasts, or g = ROE × retention ratio.
Q: Formula for stock with growing dividends? ---------CORRECT
ANSWER-----------------Gordon model: P0 = D1 / (r − g).
Q: DDM is same as what? ---------CORRECT ANSWER-----------------Gordon
Growth Model.
Q: Value no-growth dividend stock? ---------CORRECT ANSWER-------------
----P0 = D / r.
Q: Value constant-growth dividend stock? ---------CORRECT ANSWER-----
------------P0 = D1 / (r − g).
AND CORRECT ANSWERS (DETAILED ANSWERS) |
VERIFIED ANSWERS | JUST RELEASED
Q: How does a margin loan work? ---------CORRECT ANSWER----------------
-You borrow money from your broker to buy stock using your existing
securities as collateral; you pay interest on the loan.
Q: What can happen if the value of stock drops with a margin loan? -----
----CORRECT ANSWER-----------------Your equity falls, you may receive a
margin call, and the broker can force-sell holdings.
Q: What can happen if the value of stock rises with a margin loan? -------
--CORRECT ANSWER-----------------Your return on equity is amplified;
leverage increases gains.
Q: Major risk of buying stock with a margin loan? ---------CORRECT
ANSWER-----------------Losses are magnified and can exceed your cash
investment; margin calls possible.
,Q: Active vs Passive investing? ---------CORRECT ANSWER-----------------
Active tries to beat the market; passive tracks an index at low cost.
Q: Argument for Passive Investing? ---------CORRECT ANSWER--------------
---Lower fees and difficulty of beating the market.
Q: Argument for Active Investing? ---------CORRECT ANSWER---------------
--Potential to outperform by exploiting mispricing.
Q: Percent of active funds that beat passive long-term? ---------CORRECT
ANSWER-----------------A small minority—usually well under 50%.
Q: Textbook definition of valuing stocks? ---------CORRECT ANSWER------
-----------Present value of expected future cash flows.
Q: Two main stock cash flows? ---------CORRECT ANSWER-----------------
Dividends and future sale price.
, Q: Why stock pricing harder than bonds? ---------CORRECT ANSWER------
-----------Stock cash flows and growth are uncertain, no fixed maturity.
Q: Estimate dividend growth rate? ---------CORRECT ANSWER---------------
--Historical growth, analyst forecasts, or g = ROE × retention ratio.
Q: Formula for stock with growing dividends? ---------CORRECT
ANSWER-----------------Gordon model: P0 = D1 / (r − g).
Q: DDM is same as what? ---------CORRECT ANSWER-----------------Gordon
Growth Model.
Q: Value no-growth dividend stock? ---------CORRECT ANSWER-------------
----P0 = D / r.
Q: Value constant-growth dividend stock? ---------CORRECT ANSWER-----
------------P0 = D1 / (r − g).
