FINANCE 301 Latest Exam Questions all with
100% Correct Answers
What effects stocks - ANSWER Profits of company
Interest rates
Risk
Nominal Interest Rate = - ANSWER Real Interest Rate + expected inflation
Warren Buffet - ANSWER CEO of Berkshire Hathaway
Berkshire Stock (BRK.A) - ANSWER 250k
No dividends, no splits
%20 annual return
Warren Buffet Wants Managers to Act like - ANSWER Owners
Moats - ANSWER Barriers to entry
Warren Prefers Companies over: - ANSWER Stocks
Warren does not buy - ANSWER Technology companies
Warren prefers companies that generate - ANSWER large amounts of cash flow
Financial Metrics - ANSWER % Profit Margin
,% Return on Equity
Ten Principles of Finance - ANSWER 1. Higher returns require taking on more risk
2. Efficient Capital Markets are tough to beat
3. Rational investors are risk adverse
4. Supply and demand drive stocks in short-run
5. Corporate mangers should make decisions to maximize shareholder value
6. Transaction cost, Taxes, and inflation are your enemies
7. Time and value of money are closely related
8. Asset allocation is a very important decision
9. Asset Diversification will reduce risk
10. An asset pricing model will be used to value instruments
Stock Return = - ANSWER (Pt - Pt-1) + Dt
----------------
Pt-1
Greater Risk = - ANSWER Greater expected return
Stock market is efficient : - ANSWER Current prices reflect all publicly available
information
-Technology is useless to predict
-Markets are instant
Rational investors prefer - ANSWER a low risk stock
, Market price of a stock is determined by - ANSWER the interaction of the supply of stock
by sellers, and the demand for stock by buyers
-news driven
-overall market
-Industry of sector reports
-Company events/announcements
Random Walk - ANSWER Day to Day stock price changes are independent
Corollary - ANSWER Fundamentals drive stock prices in the long run
A dollar today is worth - ANSWER more than a dollar tomorrow
Future value - ANSWER Amount of money that an investment will grow to at some
future point by earning interest at a certain rate
Future Value equation - ANSWER FV = PV x (1+r) ^n
Diversification - ANSWER More Stocks = Less risk
Capital Asset Pricing Model - ANSWER A simple model that estimates rate or return an
investor should expect on a risky investment
Beta - ANSWER Measures the volatility of a stock based on the market itself
Behavioral Finance - ANSWER Involves the effects of psychology and emotion
100% Correct Answers
What effects stocks - ANSWER Profits of company
Interest rates
Risk
Nominal Interest Rate = - ANSWER Real Interest Rate + expected inflation
Warren Buffet - ANSWER CEO of Berkshire Hathaway
Berkshire Stock (BRK.A) - ANSWER 250k
No dividends, no splits
%20 annual return
Warren Buffet Wants Managers to Act like - ANSWER Owners
Moats - ANSWER Barriers to entry
Warren Prefers Companies over: - ANSWER Stocks
Warren does not buy - ANSWER Technology companies
Warren prefers companies that generate - ANSWER large amounts of cash flow
Financial Metrics - ANSWER % Profit Margin
,% Return on Equity
Ten Principles of Finance - ANSWER 1. Higher returns require taking on more risk
2. Efficient Capital Markets are tough to beat
3. Rational investors are risk adverse
4. Supply and demand drive stocks in short-run
5. Corporate mangers should make decisions to maximize shareholder value
6. Transaction cost, Taxes, and inflation are your enemies
7. Time and value of money are closely related
8. Asset allocation is a very important decision
9. Asset Diversification will reduce risk
10. An asset pricing model will be used to value instruments
Stock Return = - ANSWER (Pt - Pt-1) + Dt
----------------
Pt-1
Greater Risk = - ANSWER Greater expected return
Stock market is efficient : - ANSWER Current prices reflect all publicly available
information
-Technology is useless to predict
-Markets are instant
Rational investors prefer - ANSWER a low risk stock
, Market price of a stock is determined by - ANSWER the interaction of the supply of stock
by sellers, and the demand for stock by buyers
-news driven
-overall market
-Industry of sector reports
-Company events/announcements
Random Walk - ANSWER Day to Day stock price changes are independent
Corollary - ANSWER Fundamentals drive stock prices in the long run
A dollar today is worth - ANSWER more than a dollar tomorrow
Future value - ANSWER Amount of money that an investment will grow to at some
future point by earning interest at a certain rate
Future Value equation - ANSWER FV = PV x (1+r) ^n
Diversification - ANSWER More Stocks = Less risk
Capital Asset Pricing Model - ANSWER A simple model that estimates rate or return an
investor should expect on a risky investment
Beta - ANSWER Measures the volatility of a stock based on the market itself
Behavioral Finance - ANSWER Involves the effects of psychology and emotion
