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quester [9]
3 years ago
8

If the stock market is semistrong-form efficient, which of the following statements would be CORRECT? a. Even if a market is sem

istrong-form efficient, an investor could still earn a better return than the market return if he or she had inside information. b. A trading strategy in which you buy stocks that have recently fallen in price is likely to provide you with a return that exceeds the return on the overall stock market. c. The required returns on stocks equal the required returns on bonds. d. If you have insider information about a particular stock, you cannot expect to earn an above average return on this information because it is already incorporated into the current stock price. e. The required returns on all stocks are the same, and the required returns on stocks are higher than the required returns on bonds.
Business
1 answer:
Aleksandr-060686 [28]3 years ago
5 0

Answer:

The correct answer is letter "A": Even if a market is semi-strong-form efficient, an investor could still earn a better return than the market return if he or she had inside information.

Explanation:

The semi-strong efficiency of the market is part of the Efficiency Market Hypothesis (EMH) that states <em>changes in stock prices can be predicted as the result of all available information provided to investors</em> instead of using fundamental or technical analysis. Thus, "beating the market" could be a matter of chance and not skill.

Then, <em>investors could still beat a semi-strong-form efficient market compared to a market in which investors could obtain (somehow) insider information.</em>

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a portfolio business that generates operating cash flows over and above internal requirements, thereby providing financial resou
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1 year ago
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Present Value of Ordinary Annuity Period/Rate 5% 6% 7% 8% 9% 10 7.7217 7.3601 7.0236 6.7101 6.4177 11 8.3064 7.8869 7.4987 7.139
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Answer:

The discount rate of 8% for 11 year period provides the present value of annual cash flows to be equal to the initial investment.

Explanation:

Using the table of present value of annuity provided, we can check the rate and time period which is return the present value of cash flows from the project to be equal to initial Investment.

We are told that the Project's life is expected to be 11 Years. Thus using the 11 year period from the table we can see the following rates,

<u>11 Year Period</u>

Rate = 5%  ,  Annuity Factor = 8.3064  

Rate = 6%  ,  Annuity Factor = 7.8869

Rate = 7%  ,  Annuity Factor = 7.4987

Rate = 8%  ,  Annuity Factor = 7.1390

Rate = 9%  ,  Annuity Factor =  6.8052

We know that the annual cash flows from the project is $1,000,000 and we know the Initial Outlay is $7,139,000.

Multiplying the annual cash flow from the above annuity factors for each rate we can see which rate provides the present value of annual cash flows to be equal to initial outlay.

Rate = 5%  ,  Present value = 8.3064 *  1000000    = $8,306,400  

Rate = 6%  ,  Annuity Factor = 7.8869 *  1000000    = $7,886,900

Rate = 7%  ,  Annuity Factor = 7.4987 *  1000000    = $7,498,700

Rate = 8%  ,  Annuity Factor = 7.1390 *  1000000    = $7,139,000

Rate = 9%  ,  Annuity Factor =  6.8052 *  1000000    = $6,805,200

From the above calculation we can see that the rate of 8% provides the present value of annual cash flows to be equal to the initial investment.

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