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This test consists of 15 multiple choice questions and 5 short answer questions.

Multiple Choice Questions

1. Buffet's view of stock index futures was:
(a) they would lead to excess speculation.
(b) they should be abandoned.
(c) he relied on them.
(d) they would benefit the market.

2. Which of the following companies was the object of a hostile takeover in the 1980s?
(a) Revlon.
(b) Berkshire.
(c) General Goods.
(d) Time.

3. How long did Buffett go without buying any common stock after the Cap Cities deal in 1985?
(a) eighteen months.
(b) three years.
(c) one year.
(d) six months.

4. The settlement of the public and private cases cost Salomon:
(a) $490 million.
(b) $125 million.
(c) $45 million.
(d) $400 million.

5. Which investment banking firm did Buffett invest in?
(a) Salomon.
(b) Merrill Lynch.
(c) J.P. Morgan.
(d) Smith Barney.

6. What term is used to denote risk?
(a) gamma.
(b) alpha.
(c) beta.
(d) theta.

7. When is a squeeze considered illegal?
(a) if traders conspire to manipulate prices.
(b) if the trader profits.
(c) if the trader doesn't reveal the information.
(d) if the traders commit the squeeze.

8. Berkshire was most active in:
(a) business insurance.
(b) reinsurance.
(c) door to door policy selling.
(d) promoting auto insurance.

9. Why did Buffett refuse to financially support his adult children?
(a) he was angry with them.
(b) he wanted them to lead normal, independent lives.
(c) he had other uses for his money.
(d) he was too cheap.

10. What does Buffett say about the hostile takeover of Time?
(a) it showed how smoothly the market worked.
(b) it was a good merger.
(c) it could have been handled better.
(d) it was an example of the destructive tactics of the merger era.

11. What was Buffett's annual Christmas gift to each of his children?
(a) $10,000 the tax deductible limit on gifts to family members.
(b) vacations.
(c) anything they wanted.
(d) ten shares of Berkshire stock.

12. Who does Buffett select to run Salomon?
(a) Nicholas Brady.
(b) Paul Mozer.
(c) JM Meriwether.
(d) Deryck Maughan.

13. As a result of the stock market crash in October 1985, Berkshire:
(a) increased in value.
(b) lost one quarter of its value.
(c) lost ten percent of its value.
(d) was insolvent.

14. Buffett's new worth was approximately:
(a) $3.8 billion.
(b) $2.3 billion.
(c) $900 million.
(d) $1.35 billion.

15. What stock did Buffett begin to buy in the fall of 1988?
(a) Pepsi-Cola.
(b) ABC.
(c) Coca-Cola.
(d) NBC.

Short Answer Questions

1. When Gutfreund resigned:

2. The Efficient Market Theory was popular because it:

3. What other kind of family-owned business did Buffet buy?

4. Buffett's views on hostile takeovers included all but:

5. How many people worked at Berkshire's world headquarters:

(see the answer keys)

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