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

Multiple Choice Questions

1. What was the name of the bond holdings that Buffett added to Berkshire in 1989?
(a) General Mills.
(b) RJR Nabisco.
(c) Pepsi.
(d) Arrowhead.

2. Buffett thought that any CEO who set earning targets and forecasts might also take ______ with accounting measures.
(a) Pride.
(b) Less than legal strategies.
(c) Carelessness.
(d) Risks.

3. Buffett's criteria measured _________ expectations of the highest after-tax returns to maximize net worth in the long run.
(a) Mathematical.
(b) Emotional.
(c) Probable.
(d) Accounting.

4. Below investment grade bonds are generally called ________, since they are able to be transformed.
(a) Caterpillars.
(b) Demons.
(c) Fallen angels.
(d) Junky bonds.

5. Buffett's long term economic goal was to maximize per share _________ value of Berkshire stock by owning a diversified group of businesses.
(a) Economic.
(b) True.
(c) Market.
(d) Intrinsic.

6. Essays are from __________ that Buffett prepared for and wrote for Berkshire shareholders.
(a) Seminars.
(b) Trainings.
(c) Personal notes.
(d) Annual reports.

7. What was NOT one of the elements listed in the elements of arbitrage in the book?
(a) Change a competing event occurs.
(b) Length of time money is committed.
(c) Expected internal action.
(d) Likelihood that money is committed.

8. A bond is _______ with regular payment of interest and repayment of principle.
(a) A promise.
(b) A loan.
(c) Debt.
(d) Nothing.

9. The bonds that Buffett decides to buy in 1989 were thought to be ________, but turn out to be fallen angels.
(a) Evil.
(b) Junk.
(c) Priceless.
(d) Meaningless.

10. What was the stock market value of the company in #49 when it was first purchased by Buffett?
(a) $500M.
(b) $100M.
(c) $250M.
(d) $300M.

11. What was the value of the shares of the company that Buffett and his partner purchased thirty years after its purchase?
(a) $10,000 per share.
(b) $25,000 per share.
(c) $40,000 per share.
(d) $15,000 per share.

12. How much was the company worth that Buffett and his partner created at the time of this book?
(a) $10M.
(b) $70B.
(c) $5M.
(d) $30M.

13. Risk ___________ was defined as the pursuit of profits from anticipated events, according to the book.
(a) Movement.
(b) Memories.
(c) Investing.
(d) Arbitrage.

14. Buffett and Munger invested based on company operating results and not on ____________.
(a) Price quotes.
(b) Shareholder opinion.
(c) The stock market.
(d) Profit margins.

15. A __________ was something that Buffett and Munger believed was valuable to inform businesses owners of the year's business growth.
(a) Business report.
(b) Business forum.
(c) Business trade show.
(d) Business gathering.

Short Answer Questions

1. Who was the financial mentor that Buffett relied upon for his teachings and lessons about the way to do business?

2. Buffett is proud that ____% of the shares outstanding at the end of each year were held by the same shareholders.

3. A CEO unlikely to dispose of his successful operating business may sell profitable stock investments to redeploy _________.

4. Preferred firms must pay returns above ______ investments and be compatible with management.

5. Keynes stated: "The right method of investment is to put fairly large sums of money into enterprises which one thinks one knows something about and in the ________ of which one thoroughly believes."

(see the answer keys)

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