11.Which one of the following statements is correct?

a.

The EAR, rather than the APR, should be used to compare both investment and loan options.

b.

The APR is equal to the EAR for a loan that charges interest monthly.

c.

The APR is the best measure of the actual rate you are paying on a loan.

d.

The EAR is always greater than the APR.

e.

The APR on a monthly loan is equal to (1 + monthly interest rate)¹² - 1.

12.Newbio Labs just announced that it has received a patent for a drug that will cure a rare disease. This is a major medical advancement. However, because of the recent R&D advancement at Newbio, all market participants had correctly anticipated the success with this patent since two months ago. Which one of the following reactions to this announcement indicates the market for Newbio Labs stock is efficient?

a.

The price of Newbio Labs stock increases rapidly at the announcement to a higher price and then remains at that price.

b.

The price of Newbio Labs stock remains unchanged at the announcement.

c.

The value of all stocks suddenly increase and then level off at their higher values.

d.

All stocks quickly increase in value and then all but Newbio Labs stock fall back to their original values.

e.

The price of Newbio Labs stock increases rapidly at the announcement and then settles back to its pre-announcement level.