MOS 2277 FINAL EXAM QUESTIONS AND
ANSWERS 100% SOLVED
investing risk rule #1 - ANSWER own all ( the best) boats aka diversify
investing risk rule #2 - ANSWER don't get off the roller coaster - don't sell during low
troughs, market will always go up
risk vs volatility - ANSWER risk - only owning a few stocks -> avoid risk
volatility - fluctuating price of stocks -> welcome volatiltiy
short term rule of thumb (investing) - ANSWER keep any money you need to spend in the
next 5 years in a high-interest savings account -> provides liquidity
long term rule of thumb (investing) - ANSWER invest money on a consistent basis, no matter
up or down
what is a stock and what does it represent? - ANSWER a share in the ownership of a company
represents a claim on the company's assets and earnings
rights of a shareholder? - ANSWER no say in day-to-day operations but can vote on board of
directors
, 2 reasons for purchasing stock - ANSWER 1. sell for profit if price appreciates
2. dividend income
what does a stock price represent? - ANSWER the present value of all the future cash flows of
a company -> requires many assumptions
how do dividends affect stock price? - ANSWER dividends reduce the present value of
company's future cash flows because they pay you dividends so the stock price goes down by
the amount of a dividend
total return of stock investor - ANSWER dividend income + increase in stock price
what should you do with your dividends? - ANSWER always reinvest them - can result in huge
returns
market capitalization? what does it represent? - ANSWER total # of shares outstanding *price
per share
represents total market value of company
3 reasons hawn advises against investing in bonds? - ANSWER 1. bondholders dont share in
the profits of the company, just interest so when the company's profit increases the interest
payments stay the same -> no growth potential
ANSWERS 100% SOLVED
investing risk rule #1 - ANSWER own all ( the best) boats aka diversify
investing risk rule #2 - ANSWER don't get off the roller coaster - don't sell during low
troughs, market will always go up
risk vs volatility - ANSWER risk - only owning a few stocks -> avoid risk
volatility - fluctuating price of stocks -> welcome volatiltiy
short term rule of thumb (investing) - ANSWER keep any money you need to spend in the
next 5 years in a high-interest savings account -> provides liquidity
long term rule of thumb (investing) - ANSWER invest money on a consistent basis, no matter
up or down
what is a stock and what does it represent? - ANSWER a share in the ownership of a company
represents a claim on the company's assets and earnings
rights of a shareholder? - ANSWER no say in day-to-day operations but can vote on board of
directors
, 2 reasons for purchasing stock - ANSWER 1. sell for profit if price appreciates
2. dividend income
what does a stock price represent? - ANSWER the present value of all the future cash flows of
a company -> requires many assumptions
how do dividends affect stock price? - ANSWER dividends reduce the present value of
company's future cash flows because they pay you dividends so the stock price goes down by
the amount of a dividend
total return of stock investor - ANSWER dividend income + increase in stock price
what should you do with your dividends? - ANSWER always reinvest them - can result in huge
returns
market capitalization? what does it represent? - ANSWER total # of shares outstanding *price
per share
represents total market value of company
3 reasons hawn advises against investing in bonds? - ANSWER 1. bondholders dont share in
the profits of the company, just interest so when the company's profit increases the interest
payments stay the same -> no growth potential
