FINC 3610 Final Exam Prep Newest 2026-2027 Actual

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FINC 3610 Final Exam Prep Newest 2026-2027 Actual Exam With Complete 100 Questions And Correct Detailed Answers (Verified Answers) |Already Graded A+

Q: How does a margin loan work? - ANSWER-You borrow money from

your broker to buy stock using your existing securities as collateral; you pay interest on the loan.

Q: What can happen if the value of stock drops with a margin loan? -

ANSWER-Your equity falls, you may receive a margin call, and the broker can force-sell holdings.

Q: What can happen if the value of stock rises with a margin loan? -

ANSWER-Your return on equity is amplified; leverage increases gains.

Q: Major risk of buying stock with a margin loan? - ANSWER-Losses

are magnified and can exceed your cash investment; margin calls possible.

Q: Active vs Passive investing? - ANSWER-Active tries to beat the

market; passive tracks an index at low cost.

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Q: Argument for Passive Investing? - ANSWER-Lower fees and

difficulty of beating the market.

Q: Argument for Active Investing? - ANSWER-Potential to outperform

by exploiting mispricing.

Q: Percent of active funds that beat passive long-term? - ANSWER-A

small minority—usually well under 50%.

Q: Textbook definition of valuing stocks? - ANSWER-Present value of

expected future cash flows.

Q: Two main stock cash flows? - ANSWER-Dividends and future sale

price.

Q: Why stock pricing harder than bonds? - ANSWER-Stock cash flows

and growth are uncertain, no fixed maturity.

Q: Estimate dividend growth rate? - ANSWER-Historical growth,

analyst forecasts, or g = ROE × retention ratio.

Q: Formula for stock with growing dividends? - ANSWER-Gordon

model: P0 = D1 / (r − g).

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