FINANCE 301 Exam study | 125 latest Questions
all with 100% Correct Answers
finance - ANSWER subject area that covers the management of money
Warren Buffet - ANSWER greatest investor in modern history
Berkshire Hathaway - ANSWER owned by Buffet-generates 20% annual returns, never
had a stock split-stock around $190,000
What is Buffet's primary businesses he likes to invest in? - ANSWER Insurance-owns
100% of Geico
Risk versus return - ANSWER Higher risk means more return
How is risk measured? - ANSWER Standard Deviation
Ibboston and Sinquefield Study - ANSWER showed the direct relationship between
expected return of an asset class and the risk associated with receiving that return--
showed this over an 80 year study
Order of risk of types of investment from least to most return - ANSWER Treasury Bills-
3.7%
Gov. Bonds 5.4%
Corporate Bonds 5.9%
Large Company Stock 9.8%
Small Company Stock 11.9%
, Stock return equation - ANSWER ((New-Old)+Dividend)/Old
ECM Hypothesis - ANSWER the stock market is brutally efficient-earning exactly what we
expect it to based on associated risk
random walk hypothesis - ANSWER changes in stock prices are random and
independent-useless to try and predict the market prices
CAPM - ANSWER (capital asset pricing model)-trade off between risk associated with an
asset versus the expected returns from that asset
Unsystematic risk - ANSWER firm specific risk-Ex: Steve Jobs getting sick affects only
Apple stock
Systematic risk - ANSWER risk inherit to the market as a whole-Ex: The housing market
crash
Beta - ANSWER numerical measurement of SYSTEMATIC risk
Professor's thoughts on efficient markets? - ANSWER With a few exceptions they are
believed to be reasonably efficient
Law of Supply and Demand - ANSWER stock's current price is determined by the
intersection of supply and demand curves for the stock
Market Capitalization - ANSWER aka Market Cap- Current stock price x Number of
Shares Outstanding
all with 100% Correct Answers
finance - ANSWER subject area that covers the management of money
Warren Buffet - ANSWER greatest investor in modern history
Berkshire Hathaway - ANSWER owned by Buffet-generates 20% annual returns, never
had a stock split-stock around $190,000
What is Buffet's primary businesses he likes to invest in? - ANSWER Insurance-owns
100% of Geico
Risk versus return - ANSWER Higher risk means more return
How is risk measured? - ANSWER Standard Deviation
Ibboston and Sinquefield Study - ANSWER showed the direct relationship between
expected return of an asset class and the risk associated with receiving that return--
showed this over an 80 year study
Order of risk of types of investment from least to most return - ANSWER Treasury Bills-
3.7%
Gov. Bonds 5.4%
Corporate Bonds 5.9%
Large Company Stock 9.8%
Small Company Stock 11.9%
, Stock return equation - ANSWER ((New-Old)+Dividend)/Old
ECM Hypothesis - ANSWER the stock market is brutally efficient-earning exactly what we
expect it to based on associated risk
random walk hypothesis - ANSWER changes in stock prices are random and
independent-useless to try and predict the market prices
CAPM - ANSWER (capital asset pricing model)-trade off between risk associated with an
asset versus the expected returns from that asset
Unsystematic risk - ANSWER firm specific risk-Ex: Steve Jobs getting sick affects only
Apple stock
Systematic risk - ANSWER risk inherit to the market as a whole-Ex: The housing market
crash
Beta - ANSWER numerical measurement of SYSTEMATIC risk
Professor's thoughts on efficient markets? - ANSWER With a few exceptions they are
believed to be reasonably efficient
Law of Supply and Demand - ANSWER stock's current price is determined by the
intersection of supply and demand curves for the stock
Market Capitalization - ANSWER aka Market Cap- Current stock price x Number of
Shares Outstanding
