1.) Geothermal corporation issued a press release before the stock market opened announcing that its earnings are the same as last years earnings. Explain how each of the following individual scenarios could be consistent with the semi-strong form of market efficiency.

(a) When trading opened after the announcement, the stock price quickly increased by 20%.

(b) The stock price of Geothermal decreased slowly over the 30 days before the announcement that earnings were unchanged from last year.

(c) The stock price decreased by 10% immediately following the announcement but then increased throughout the day so that the closing price was only 2% below the previous day.

2.) You purchased 2,000 shares of stock for $47 per share exactly one year ago. During the year, the stock paid a $.60 dividend per share and the current stock price is $37 per share. The inflation rate the last year was 2%. Answer the following (showing all work):

(a) Calculate the actual return (also called percentage return) on your investment over the last year.

(b) Calculate (i) the dividend yield and (ii) the percentage capital gain.

(c) Calculate the real rate of return on the stock.