According to the strong form of efficient market hypothesis, private information is of no help in earning abnormally high returns.
<h3>What is an efficient market hypothesis?</h3>
It should be noted that an efficient market hypothesis simply means that assets reflect the information that are available.
In this case, according to the strong form of efficient market hypothesis, private information is of no help in earning abnormally high returns.
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Answer:
a. the difference between deficits and surpluses
Explanation:
A deficit is barely the negative interpretation of surplus. For example put up with a nation’s revenue, subtract its expenditures, you get the difference which maybe deficit or surplus. When is deficit, show that there need to borrow and that is how federal debt are derived.
Answer:
average beta of the new stocks to achieve the target required rate of return is 2.29
Explanation:
given data
Portfolio amount invested = $40,000,000
Beta = 1
Risk free rate = 4.25%
Market risk premium = 6%
Hazel expects = $60 million
expected return new investments = 13.00%
to find out
average beta of new stocks be to achieve the target required rate of return
solution
we will use here CAPM formula that is
Expected return = Risk free rate + Beta × Market risk premium .........1
put here value we get
13% = 4.25% + Beta × 6%
0.06 × Beta = 13% - 4.25%
Beta = 1.458
now we get Weighted beta that is express as
Weighted beta = weight of old stock in new portfolio × 1 + Weight of new stock in new portfolio × beta of new stock ..................2
put here value we get
1.458 =
solve it we get
beta = 2.29
so that average beta of the new stocks to achieve the target required rate of return is 2.29