Choose wisely. There is only one correct answer to each question.
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1.
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.
2.
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.
3.
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.
4.
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.
5.
What does Warren Buffett think that diversification will do to your portfolio?
Lower returns and increase risk. Buffett does not accept the common view of diversification. Rather, he sees it being detrimental in a lot of cases.
6.
Warren Buffett believes that good managers are likely to turn around a bad business.
False. Buffett does not believe that good managers are likely to turn around a bad business.
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.
