Financial Theory FAQs

  1. What are the benefits of using ceteris paribus assumptions in economics?

  2. How do investment advisors calculate how much diversification their portfolios need?

  3. What are some of the uses of the coefficient of variation (COV)?

  4. Why is the insurance sector considered a low-risk investment?

  5. What is the difference between the rule of 70 and the rule of 72?

  6. Why should investors care about risk weighted assets of a bank?

  7. What is the breakdown of subjects covered on the Series 6 exam?

  8. What are some classes I can take to prepare for the Series 6 exam?

  9. What is the risk return tradeoff for bonds?

  10. What is the formula for calculating the capital to risk weight assets ratio for a ...

  11. What option strategies can I use to earn additional income when investing in the ...

  12. How do I calculate how long it takes an investment to double (AKA 'The Rule of 72') ...

  13. How valuable is the forward rate as an overall economic indicator?

  14. Under what circumstances might a company decide to do a hostile takeover?

  15. How does the equity risk premium correlate with the Federal Reserve's prime rate?

  16. How do I calculate the equity risk premium in Excel?

  17. Should I invest in penny stocks or large cap stocks for my retirement portfolio?

  18. How can I manage the three possible sources of business risk?

  19. What risk factors should investors consider before purchasing a callable bond?

  20. What metrics should I use to evaluate the risk return tradeoff for a mutual fund?

  21. What are the main differences between a mixed economic system and pure capitalism?

  22. Did the repeal of the Glass-Steagall Act contribute to the 2008 financial crisis?

  23. What are some examples of risks associated with financial markets?

  24. What is a good annual return for a mutual fund?

  25. How can the problem of asymmetric information be overcome?

  26. What does a high equity risk premium signify about a company's stock future?

  27. How can companies reduce internal and external business risk?

  28. What is Z-spread and option adjusted credit spread?

  29. What are common use cases for marginal analysis?

  30. What is a Z bond in a collateralized mortgage obligation (CMO)?

  31. How were the figures 80 and 20 arrived at in the 80-20 rule (Pareto Principle)?

  32. Are short-term investments a good strategy for cash-rich small businesses"?

  33. Can you accidentally engage in insider trading?

  34. What is a geometric mean in statistics?

  35. What are some real-life examples of the economies of scope?

  36. How reliable or accurate is marginal analysis?

  37. How is the 80-20 rule (Pareto Principle) used in management?

  38. Why does the efficient market hypothesis state that technical analysis is bunk?

  39. What is the difference between speculation and gambling?

  40. How do you use a financial calculator to determine present value?

  41. How accurate is the equity risk premium in evaluating a stock?

  42. What are the most effective ways to reduce moral hazard?

  43. How does the risk of investing in the electronics sector compare to the broader market?

  44. How do markets account for systematic risk?

  45. What is the theory of asymmetric information in economics?

  46. How does market risk differ from specific risk?

  47. How is perpetuity used in the Dividend Discount Model?

  48. How valid is the notion of economies of scope?

  49. Can I use the current yield to compare a bond to an equity investment?

  50. How can a company resist a hostile takeover?

  51. What is the relationship between modified duration and interest rates?

  52. What level of correlation among investments will guarantee market returns but have ...

  53. What are some examples of a value added tax?

  54. What nations other than the U.S. have risk-free interest rates?

  55. How does unlevered beta help in risk management?

  56. When is a call option considered to be "in the money"?

  57. What's the difference between budgeting and financial forecasting?

  58. What is required to become an accredited investor in a private placement?

  59. Which markets are most prone to market failure from adverse selection?

  60. What does it mean to be absolutely risk averse?

  61. How does adverse selection affect insurance premiums?

  62. Are all fixed costs considered sunk costs?

  63. Can the Efficient Market Hypothesis explain economic bubbles?

  64. What is the variance/covariance matrix or parametric method in Value at Risk (VaR)?

  65. How is it possible for a rate to be entirely risk-free?

  66. What is backtesting in Value at Risk (VaR)?

  67. How do I discount Free Cash Flow to the Firm (FCFF)?

  68. What is RiskMetrics in Value at Risk (VaR)?

  69. What are some of the advantages and disadvantages of DuPont Analysis?

  70. How is risk priced in the market?

  71. How is risk aversion measured in Modern Portfolio Theory (MPT)?

  72. How do interest rates impact risk aversion in the market?

  73. Which asset classes are the most risky?

  74. How does the Fair Accounting Standards Board (FASB) regulate deferred tax liabilities?

  75. Why do some investors believe that unsystematic risk is not relevant?

  76. What is the difference between variance and covariance?

  77. Is variance good or bad for stock investors?

  78. How risky are small cap stocks?

  79. What are some common measures of risk used in risk management?

  80. How is the Capital Asset Pricing Model (CAPM) represented in the Security Market ...

  81. Where did market segmentation theory come from?

  82. What types of risk are incorporated in Security Market Line (SML) analysis?

  83. What's the difference between EaR, Value at Risk (VaR), and EVE?

  84. How do I interpret a Security Market Line (SML) graph?

  85. What is the relationship between confidence inferrals and a null hypothesis?

  86. Does 'hurdle rate' mean different things in different industries?

  87. Why does accumulated depreciation have a credit balance on the balance sheet?

  88. What is the difference between risk and opportunity cost?

  89. How do modern corporations deal with agency problems?

  90. Why are treasury bond yields important to investors of other securities?

  91. How do I set a strike price in a put?

  92. What kind of securities should a risk-averse investor buy?

  93. Is market risk premium the same for all investors and investments?

  94. How is the risk-free rate determined when calculating market risk premium?

  95. Where did Modern Portfolio Theory (MPT) come from?

  96. What is a relative standard error?

  97. When does positive correlation prove causation?

  98. Besides operating leverage, what are other important forms of leverage for businesses?

  99. How do sunk costs create a barrier to entry for new firms?

  100. Is the market risk premium the same for stocks and bonds?

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