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A: E(R) = Rf + (beta * (Rm - Rf)) E(R) = Expected return = 5.825% Rf = Risk free rate = 2% Beta = 0.85…
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A: Initial cost = $57,771 Annual cash inflow = $12,000 WACC = 12% Period = 8 Years
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- QUESTION 5 One of the arguments for the irrelevance of exchange rate exposure management is that: O a. Individual investors cannot hedge exchange rate exposure as effectively as big companies O b. Foreign exchange markets are perfectly efficient. O c. Purchasing power parity does not hold. Od. Cash Flows become less predictable. O e. Cash flows become more predictable. QUESTION 6 In a perfectly integrated financial market: O a. The real risk-adjusted returns of integrated markets should be higher than those of segmented markets Ob. There are no real risk-adjusted returns since markets are fully integrated. O C. The real risk-adjusted returns expected to prevail in each country and currency should be equal. Od. The real risk-adjusted returns should be lower than returns on segmented markets. O e. The real risk-adjusted returns on integrated markets should be higher than those of segmented markets.PQ 6 In the Dornbusch "overshooting" model, asset markets adjust rapidly to disturbances than do goods markets, and therefore the exchange rate and the price level proportionately to each other in the short run. a. more/move b. more/do not move c. less/move d. less/do not moveA Moving to another question will save this response. Question 14 The market compensates investors for accepting which type(s) of risk? O None of the listed selections are correct O market and firm-specific risk O market risk only O firm-specific risk only O diversifiable risk A Moving to another question will save this response. MacBoc esc F1 F2 F3 F4 F5 # $ 2 4 W E T 60
- QUESTION 1 "If a market is efficient you cannot make a profit by trading in it.” Discuss whether you think this statement is true.If markets are efficient, how is it possible that market bubbles and crashes occur?What is Efficient Market Hypothesis (EMH) Does the Global Financial Crisis of 2008-09 support or invalidate the EMH? article if needed: The Global Financial Crisis and the Efficient Market Hypothesis, What have we learned?
- A4 6 c c. In a well-functioning, well-organized, active market, can a stock be persistently over- or undervalued relative to an average asset in the market? Explain why or why not. How and when is equilibrium achieved?16 This type of risk is related to overall market or the economy and it is Non-diversifiable. However, this risk could be reduced through risk mitigation and transferring technique* A. Unsystematic risk B. Systematic risk C. Financial risk D. Fiduciary risk3. (a) What are the Momentum and Reversal Effects? How does the weak form of the efficient market hypothesis struggle to explain these effects? [1... i. **
- QUESTION 15 Which of the following statements about Markovitz's portfolio theory is not correct? O A. Portfolio theory ignores unsystematic risk B. Portfolio theory can accommodate investors with different attitudes to risk O. Portfolio theory accommodates the existence of risk free assets OD. Portfolio theory preceded Sharpe's capital asset pricing model O E. Portfolio theory is more appropriate for large institutional investors rather than for private investorsWhy does market bubble occur?Discuss.In theory, the arbitrage opportunity does not exist. However, with the new technologies and increased globalization, could arbitrage opportunity exist in some new ways?