9. Efficient markets hypothesisWhich of the following statements are consistent with the efficient markets hypothesis? Check all that apply.You should spend several hours a day studying the business section of your local newspaper to determine which stocks to add to yourinvestment portfolio.The stock market is informationally efficient.An average person in the market will believe that all stocks are fairly valued.

The correct answers are:B) The stock market is informationally efficient.C) An average person in the…

Answered: 9. Efficient markets hypothesis Which…

Essentials of Economics (MindTap Course List)

8th Edition

ISBN:9781337091992

Author:N. Gregory Mankiw

Publisher:N. Gregory Mankiw

Chapter19: The Basic Tools Of Finance

Section: Chapter Questions

Problem 4PA

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What are some reasons why the investment strategy of a 30-year-old might differ flow the investment strategy of a 65-year-old?
9. Efficient markets hypothesis Which of the following are consistent with the efficient markets hypothesis? Check all that apply. It is worth hiring a financial adviser to find cheap stocks to purchase. An average person in the market will believe that all stocks are fairly valued. The stock market is informationally efficient.
14. Investment in Musical ActsSigning new music acts can be highly speculative. Record producers at music studios have to get budget approval before they sign a new act to a recording deal. Most acts perform a tried and true form of popular music in which record sales can be pretty well predicted. However, once they get approval for their budgets, why do producers sometimes sign riskier acts who either flop or â€œbreak-outâ€ into the next sensation?
Suppose that you are asked to forecast future stock prices for Tesla, so you proceed tocollect all available information. The day you announce your forecast, Toyota announce abrand-new plan to merge and reshape the structure of the electric carts industry. Wouldyour forecast still be considered optimal? Discuss.
Three students have each saved $1000. Each has an investment opportunity in which he or she can invest up to $2000. Here are the rates of return on the students’ investment projects: Harry 5 percent Ron 8 percent Hermione 20 percent If borrowing and lending are prohibited, so each student can use only personal saving to finance his or her own investment project, how much will each student have a year later when the project pays its return? Now suppose their school opens up a market for loanable funds in which students can borrow and lend among themselves at an interest rate r. What would determine whether a student would choose to be a borrower or lender in this market? Among these three students, what would be the quantity of loanable funds supplied and quantity demanded at an interest rate of 7 percent? At 10 percent? At what interest rate would the loanable funds market among these three students be in equilibrium? At this interest rate, which student(s)…
17.10. SALE OF BUSINESS. Suppose that a firm owns a business unit that it wants to sell. Potential buyers know that the seller values the unit at either $100 million, $110 million, $120 million,... $190 million, each value equally likely. The seller knows the precise value, but the buyer only knows the distribution. The buyer expects to gain from synergies with its existing businesses, so that its value is equal to seller's value plus $10 million (In other words, there are gains from trade.) Finally, the buyer must make a take-it-or-leave-it offer at some price p. How much should the buyer offer?
Which of the following is NOT represented in a stock and flow diagram? O a. Levels b. Rates c. Constants d. Flows e. Sources f. None of the above
7. Why the price elasticities of demand and supply are very important? If there is a property investor which of the two markets should they choose and why? Which market is more risky? 8. A simple stock flow model - quick adjustment of rents discuss how the stock model operates if an exogenous factor affects the market.
A company in real estate sold a house about 200 years ago for $20. If they had invested this amount at an interest rate of 10 percent per year, 2. how much would they have today? The same company has an investment project that would cost $25 million today and yield a payoff of $30 million in 3 years. Should the firm undertake the project if the interest rate is 8 percent? 6 percent ? Can you figure out the exact cutoff for the interest rate between profitability and non profitability? 3. The same company has an investment project that would cost $25 million today how many years will take to yield a payoff of $30 million with 9.5%?
As and example of a possible investment restriction, an insurer mah only be allowed to invest up to 20 percent of its assets in common stock. What penalty is imposed upon the insurer that invests 30 percent of available assets in common stock?A. The additional 10 percent must be disposed of by year endB. The state regulators would impose a 10 percent fine on the insurer.C. The additional 10 percent would be a nonadmitted asset.D. The additional 10 percent would only be listed at cost.
D & R A1 11 - 3 Question 11. Hedging with Stock Index Futures You manage a portfolio that is currently all invested in equities in companies in five major Canadian industries. The market value involved and beta for each industry are shown in the table below. Industry Market Value Beta Oil and Gas $1,100,000 1.2 Technology 900,000 1.5 Utilities 1,500,000 0.8 Financial 1,000,000 1.3 Pharmaceutical 800,000 1.1 You believe that the Canadian equity market is on the verge of a big but short-lived downturn. You would move your portfolio temporarily into T-bills, but you do not want to incur the transaction costs of liquidating and re-establishing your equity position. Instead, you decide to hedge your portfolio with three-month S&P/TSX 60 index futures contracts for one month. Currently, the level of the S&P/TSX 60 index is 851.38, the three-month futures price of the S&P/TSX 60 is 856.40, and one contract is for $200 times…
1. Suppose you buy a share of stock for $10 and sell it for $20; your profit is thus $10. If that happens within a year, your rate of return is an impressive 100%. If it takes five years, what would be the annual rate of return on your investment?

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