Choose wisely. There is only one correct answer to each question.
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1.
When owning a stock, you should evaluate its price relative to the price you paid for it.
False. The price you paid for it isnt very relevant. What is relevant for evaluating a stocks price is the estimated value of future cash flows.
2.
All else equal, you should be most interested in buying _______.
A wide-moat company with mediocre management. Remember, the economics of a business usually trumps the competence of management.
3.
What sort of expectation should a stock investor have regarding success?
Success should be something you are willing to wait for. Even though stocks have historically returned in the 10% range, you must still have patience when investing in them. If you expect to get rich quickly, you will most likely be disappointed, and you may find yourself drawn to speculating, which is very volatile.
4.
The future is unpredictable. But you can protect yourself against unpredictability by having a margin of safety built into a stock that you buy.
True. A margin of safety -- for example, paying less for a stock than its book value -- can dampen the effect of the futures unpredictability.
5.
If a company you are investing in reports a nice big surprise, what can you expect?
There will be more surprises. Its not a sure thing, but you can expect more surprises, as there is likely to be a trend going on.
