Question 100 market efficiency, technical analysis, joint hypothesis problem
A company selling charting and technical analysis software claims that independent academic studies have shown that its software makes significantly positive abnormal returns. Assuming the claim is true, which statement(s) are correct?
(I) Weak form market efficiency is broken.
(II) Semi-strong form market efficiency is broken.
(III) Strong form market efficiency is broken.
(IV) The asset pricing model used to measure the abnormal returns (such as the CAPM) had mis-specification error so the returns may not be abnormal but rather fair for the level of risk.
Select the most correct response:
The following equation is the Dividend Discount Model, also known as the 'Gordon Growth Model' or the 'Perpetuity with growth' equation.
###p_0=\frac{d_1}{r_\text{eff}-g_\text{eff}}###
Which expression is NOT equal to the expected capital return?
Question 180 equivalent annual cash flow, inflation, real and nominal returns and cash flows
Details of two different types of light bulbs are given below:
- Low-energy light bulbs cost $3.50, have a life of nine years, and use about $1.60 of electricity a year, paid at the end of each year.
- Conventional light bulbs cost only $0.50, but last only about a year and use about $6.60 of energy a year, paid at the end of each year.
The real discount rate is 5%, given as an effective annual rate. Assume that all cash flows are real. The inflation rate is 3% given as an effective annual rate.
Find the Equivalent Annual Cost (EAC) of the low-energy and conventional light bulbs. The below choices are listed in that order.
A fairly priced stock has a beta that is the same as the market portfolio's beta. Treasury bonds yield 5% pa and the market portfolio's expected return is 10% pa. What is the expected return of the stock?
A 30 year Japanese government bond was just issued at par with a yield of 1.7% pa. The fixed coupon payments are semi-annual. The bond has a face value of $100.
Six months later, just after the first coupon is paid, the yield of the bond increases to 2% pa. What is the bond's new price?
A European call option will mature in ##T## years with a strike price of ##K## dollars. The underlying asset has a price of ##S## dollars.
What is an expression for the payoff at maturity ##(f_T)## in dollars from having written (being short) the call option?
Question 445 financing decision, corporate financial decision theory
The financing decision primarily affects which part of a business?
The below graph shows a project's net present value (NPV) against its annual discount rate.
For what discount rate or range of discount rates would you accept and commence the project?
All answer choices are given as approximations from reading off the graph.
The Australian dollar's value was:
Did the Australian dollar or against the US dollar between these dates?