BLOOMBERG MARKET CONCEPTS FINAL
PAPER VERIFIED QUESTIONS WITH
DETAILED SOLUTIONS
●● Why do company manager-owners smile when they ring the stock
exchange bell at their IPO?
Answer: An IPO reveals the value of the manager-owners' stake.
●● In 1999, James Glassman and Kevin Hassett published a book called
"Dow 36,000". At the time, the Dow Jones Industrial Average Index was
just under 12,000. Which of the following is a potential substitute for the
book title?
Answer: "The Sum of the Share Prices of All 30 Dow Jones Members
Will Triple"
●● What is the prime reason that Jenny's discretionary income is more
volatile than her salary?
Answer: Her mortgage payments and necessities are fixed.
●● A luxury cell phone maker has a high fixed-cost base and a lot of
debt. Which stakeholder in the company would you rather be?
Answer: a shareholder in a booming economy
, ●● What would the approximate return be on the S&P 500 from the
trough of March 2009 (680) to the end of 2013 (1,848), ignoring
dividends?
Answer: 170%
●● Assume that an investor in the S&P 500 reinvests his dividends.
According to the chart, what approximate return would this investor
have reaped from the early 2009 (1,000) trough to the endpoint (3,400)?
Answer: 340%
●● Why are equities volatile?
Answer: Due to the residual nature of earnings
●● Which of the following statements is true?
Answer: When you buy an equity, the most you can lose is 100% and
your potential gain is unlimited.
●● Company A pays a dividend of 2%. Company B's stock price
increases by 1% plus the inflation rate every year. Company C pays 3%
dividends, and its stock price decreases every year by 2%. Company D
pays 0% dividends, and its stock price does not increase year over year.
If the companies are otherwise identical, which would you invest in?
Answer: Company B
PAPER VERIFIED QUESTIONS WITH
DETAILED SOLUTIONS
●● Why do company manager-owners smile when they ring the stock
exchange bell at their IPO?
Answer: An IPO reveals the value of the manager-owners' stake.
●● In 1999, James Glassman and Kevin Hassett published a book called
"Dow 36,000". At the time, the Dow Jones Industrial Average Index was
just under 12,000. Which of the following is a potential substitute for the
book title?
Answer: "The Sum of the Share Prices of All 30 Dow Jones Members
Will Triple"
●● What is the prime reason that Jenny's discretionary income is more
volatile than her salary?
Answer: Her mortgage payments and necessities are fixed.
●● A luxury cell phone maker has a high fixed-cost base and a lot of
debt. Which stakeholder in the company would you rather be?
Answer: a shareholder in a booming economy
, ●● What would the approximate return be on the S&P 500 from the
trough of March 2009 (680) to the end of 2013 (1,848), ignoring
dividends?
Answer: 170%
●● Assume that an investor in the S&P 500 reinvests his dividends.
According to the chart, what approximate return would this investor
have reaped from the early 2009 (1,000) trough to the endpoint (3,400)?
Answer: 340%
●● Why are equities volatile?
Answer: Due to the residual nature of earnings
●● Which of the following statements is true?
Answer: When you buy an equity, the most you can lose is 100% and
your potential gain is unlimited.
●● Company A pays a dividend of 2%. Company B's stock price
increases by 1% plus the inflation rate every year. Company C pays 3%
dividends, and its stock price decreases every year by 2%. Company D
pays 0% dividends, and its stock price does not increase year over year.
If the companies are otherwise identical, which would you invest in?
Answer: Company B
