Suppose you are 28 and married. You and your spouse file for income taxes jointly. Youare in the 25% tax bracket. You are considering a few personal investment issues.1. If the financial market is informationally efficient, then you, as an investor, onaverage, should earna. only zero returnb. positive normal return and zero abnormal returnzero rormal return and positive abnormal returnd. positive normal return and positive abnormal returnin the long run.c.2. Suppose you believe that the security market is efficient in the semi-strong form.Which of the following statements is correct?a. Day trading is good because it may consistently beat the market and it savestransaction costs and taxes.b. Day trading is not good because it cannot consistently beat the market and itinvolves high transaction costs and taxes.c. Day trading may consistently beat the market, but it involves high transactioncosts and taxes.d. Day trading cannot consistently beat the market, but it saves transaction costs and

“Since you have posted multiple questions, we will solve the first question for you. If you want any…

1. If the financial market is informationally efficient, then you, as an investor, on average, should earn a. only zero return b. positive normal return and zero abnormal return zero rormal return and positive abnormal return d. positive normal return and positive abnormal return in the long run. с.

1. If the financial market is informationally efficient, then you, as an investor, on average, should earn a. only zero return b. positive normal return and zero abnormal return zero rormal return and positive abnormal return d. positive normal return and positive abnormal return in the long run. с.

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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Suppose the management of a firm is trying to allocate liquid assets to two accounts, one of which is riskless but pays no interest, while the other offers a risky return. Assume the rate of return r on the second account is uniformly distributed over the range [-0.5, 0.5]. Let R denote the amount currently available for allocation to the two accounts, and S denote the amount invested in the risky asset. Suppose management would like to make the next period investment value as large as possible but subject to the condition that R + Sr not fall below 95% of the original value of R too often so that if the investment falls below 95% of its original value, it should not do so more than 25% of the time. Calculate the ratio of investment and the amount available, that is, a = R
1. Which form of market efficiency is the best among weak, semi strong and strong? 2. Is stock market efficient? Give logic in favour of your answer
A critical assumption in the classical model is that a. markets are perfectly competitive in the long run b. markets clear in the long run c. markets are perfectly competitive in the short run d. markets clear in the short run
Do you think investors can earn abnormal returns in financial markets that are at least semi strong-form efficient?
What are the TRIN Statistics and Cofidence Index and what do their values describe about the bullish and bearish direction of the market?
of stion According to MM Case II, if the expected return on assets decreases, what happens to the expected return on equity? Select one: Oa increases O b. remains constant Oc decreases O d. depends on the firm's capital structure Time le
The Profitability Index (PI) is a financial metric that depends only on the Present Value (PV) of expected future cash inflows. This statement is: a False. b Only partly true. c True d Only partly false.
3. Suppose the market is wild; it is modeled by o → (a) What is the value of a Call? (b) What is the value of a Put? (c) Explain both answers in terms of finance.
8. The efficient markets hypothesis True or False: The efficient markets hypothesis holds only if all investors are rational. O False O True Almost all financial theory and decision models assume that the financial markets are efficient. The informational efficiency of financial markets determines the ability of investors to "beat" the market and earn excess (or abnormal) returns on their investments. If the markets are efficient, they will react rapidly as new relevant information becomes available. Financial theorists have identified three levels of informational efficiency that reflect what information is incorporated in stock prices. Identify the form of capital market efficiency under the efficient market hypothesis described in the following statement: Current market prices reflect all relevant information, whether it is known publicly or privately. This statement is consistent with: O Semistrong form efficiency O Strong form efficiency O Weak form efficiency
of stion According to MM Case II, if the expected return on assets decreases, what happens to the expected return on equity? Select one: Oa increases O b. remains constant Oc decreases O d. depends on the firm's capital structure Time le
How would I do the same calculation if Beta is 1.2? That would be 1-1.2= -0.2 invested in the money market. How does that make sense?
One approach for using multifactor models is to use factors that capture systematic risk. Which of the following is not a common factor used in this approach? Market capitalization O Unexpected changes in real GDP O Unexpected changes in inflation Yield curve shifts Consumer confidence

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