Choose wisely. There is only one correct answer to each question.
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1.
All of the following statements about Warren Buffett are false except _______.
Buffett believes that he has never made a good deal with bad people. Though the economics of a business is the most important factor, Buffett believes it's important to work with competent, honest managers. He believes that he has never made a good deal with a bad person.
2.
Warren Buffett has written that he _______ when he misses out on big returns in areas he doesn't understand.
Isn't bothered. Rather, he sticks to what he knows, despite new trends.
3.
A margin of safety is _______.
The difference between a company's estimated fair value and its stock price (where the price is lower than the fair value). Since no intrinsic value calculation is perfect, Buffett requires a satisfactory margin for error before he makes an investment.
4.
Warren Buffett, the world's most well-known investor, believes that one must have a high IQ to succeed at investing.
False. Buffett believes that one needs the right temperament and a successful framework, but not a high IQ.
5.
Warren Buffett believes that portfolio diversification _______.
Probably increases risk for informed investors by diluting the effect of their top choices, the companies with the least risk and highest potential returns. Buffett rejects the idea that diversification is helpful to informed investors. He thinks the additional investment into your best ideas is likely to yield a better result than investment into your 20th or 30th favorite company.
6.
To Warren Buffett, a stock is a candidate for purchase if its market price is _______.
Below the discounted cash-flow calculation of fair value. The ones to buy are those that are in this range.
7.
Warren Buffett prefers to invest in companies that _______.
All of the above. Companies like this are very likely to produce higher cash flows over time.
