1. PGB, Inc, made an announcement about expanding business to overseas markets. The share price decreased by 10% on the date of the announcement. If the market is semi-strong form efficient, which of the following is incorrect?

a.The negative value impact is immediately reflected in the share price.

b.Investors believe the value of the firm will be reduced by this decision.

c.Inventors have over-reacted to the announcement.

d.All of the other choices.

2. Bond K has a coupon rate 6% per year (coupons paid out semi-annually), yield to maturity 3.5% per half-year and currently sell at price of $Y. What will be the price of the bond 1 year from now, right after the coupon is paid out (assuming the yields stay unchanged)?

a.Need more information to answer

b.More than $Y

c.Less than $Y

d.Unchanged

3. Bond G sells for 876.50. Its yield is 7.60% and duration 8 years. Based on the duration, what is the approximate new $ price after yields suddenly drop to 6.80%? (rounded to two decimal places)

a.None of the other choices

b.$928.63

c.$932.60

d.$926.64