1. If 80% of the price of a stock reflects the present value of future cash flows, then it follows that the growth in the stock price will be proportional to the growth in the cash flows. Cash flows can be generated from sources other than profits, but profits are usually the main component of cash flows. If it follows that profits generate cash flows, then the reporting of profits will impact the price of a listed security. An investor would have no way to judge the success level of a quarterly earnings release if it weren't for the comparison to the prior quarter or the year-over-year comparison. The other reason quarterly results are so important to the stock market is that it is very current information as opposed to waiting until 3 months after year end for the completion of the audited financial statements.

2. Warren Buffet is a true entrepreneur who figured out very early on that he couldn't learn or know everything about every business, but he could buy a business and therefore buy the talents of the existing management. If he bought a successful business, then that entity must have successful management. It seems so easy, but maybe the key with him is that he allowed management to do what they did best, and only interfered when there was a problem. The concept of EMH says you buy companies at fair market value, and he might agree with that. He counteracts EMH by holding the companies for a longer period of time than a more typical stock market investor might do. I've injected opinion in this statement, but it makes sense to me.

3. The type of investor who might be interested in preferred stocks is one who wants a low risk profile with a decent rate of return. Preferred issues are between stocks and bonds in terms of risk. There are two other factors which can make preferred stocks attractive: a callable or a convertible feature. Callable gives the company the right to retire the stock at par while convertible adds the right to exchange it for common stock. Both could have great advantage in the right situation. A third reason to buy the preferred stock of a company rather than the common stock is that in bankruptcy, there is a preference for preferred over common, in the order of liquidation.

4. Probably the most important decisions a company can make regarding expansion plans are based in the change in interest rates. Companies will cap their growth with existing markets, storefronts, plants or equipment, but low and steady interest rates will have them considering serious expansion. There is risk in expansion, whether it is into new markets, new countries, new products or even vertical integration, but management decisions will weigh possible profits against risk tolerance.

5. The nominal rate of return is the real rate of return (ignoring the effects of inflation), not the stated rate. Using your example, a preferred purchased at par with an 8% interest will yield $80, but you paid $600 for the security, then the nominal rate (or yield) is 13.3%. It is calculated at $80 / 600 = 13.33%. Likewise, if you paid 1400 for the preferred, the nominal rate would be 5.71% ($80 / 1400).

6. I had some trouble with this question even though I understand that a discounted cash flow calculation will result in the market price of a mining stock. I've think that mining companies are valued based on their diminishing resources. I even found your exact problem, but I can't match the answer perfectly. I must be missing some little piece, and it is eluding me. I believe the answer is $23.92 which is close but not exactly one of the multi-guess suggestions. I did the best I could and I hope that C. is the correct answer.