Financial History
Which investor is known for coining the term “Mr. Market”?
Benjamin Graham
What is the formula for the present value of a future cash flow?
PV = CF / (1 + r)ⁿ
If I think the market is going to go down, I can hedge using this simple derivative
Put Option
The current coverage provided by the Federal Deposit Insurance Corporation (FDIC) is:
$250,000
What is the Sharpe ratio used to measure?
Risk-adjusted return
What major event caused the collapse of Lehman Brothers?
The subprime mortgage crisis
What is levered cash flow
Cash available to equity holders
This measures the market’s expectation of how much an asset’s price will move, derived from option prices
Implied volatility
Which of the following investments is NOT protected under SIPC? Convertible bonds, Warrants, Futures contracts, Preferred stock
Futures contracts
What risk does diversification aim to reduce?
Unsystematic Risk
The combination of high inflation and high unemployment in the 1970s led economists to coin what term?
Stagflation
Perpetuity growth rate (g) must be less than the
WACC
Selling call options against a stock position you already own is known as
Covered call
When equity securities fail to qualify for listing on either a physical or electronic exchange, they are referred to as:
OTC equities
An optimal risky portfolio aims to maximize
Sharpe Ratio
This quantitative hedge fund, founded by mathematician Jim Simons, is the best-performing hedge fund in history, averaging around 66% annual returns before fees.
Renaissance Technologies’ Medallion Fund
In most DCF valuations, roughly what percentage of a company’s total value typically comes from the terminal value?
Between 60% and 80%
What vegetable is the only commodity that is legally banned from being traded in U.S. futures markets?
Onions
A broker-dealer that clears its trades through another broker-dealer is referred to as
An introducing firm
According to CAPM, what determines an asset’s expected return?
Its beta relative to the market
Who was one of the few economists that predicted the great depression
Roger Babson
If a DCF’s terminal value accounts for an unusually high share of total enterprise value (say, over 85%), what does that usually indicate about the model?
Overly optimistic growth assumptions or an excessively low discount rate
A long call position has
Limited loss and unlimited upside
Margin requirements were established under which Act?
The Securities Exchange Act of 1934
If a security lies above the Security Market Line (SML) predicted by the CAPM, it is said to be what?
Undervalued