3. Sally would like to save money every month for her college tuition over the next five years. She plans to start by depositing $1,000 next month in an account that pays 6% annual percentage rate. Afterwards, the amount of her deposit will grow by 2% each month. Which of the following will increase the total amount of savings he can have five years later?

I. Deposit a constant amount of $1,500 every month

II. Deposit $1,200 in the first month and the savings grows by 1.5% each month III. Deposit $800 in the first month and the savings grows by 2.5% each month IV. Deposit in a different account that pays 6.2% effective annual rate.

A. I and II only B. I and III only C. II and III only D. II and IV only E. III and IV only

4. Which of the following are examples of systematic risk in the Hong Kong market?

I. Deutsche Bank has its Asian business shrunk and lays off thousands of employees.

II. HKMA (the Hong Kong Monetary Authority) announces that the base rate will be adjusted downward by 1% in response to the US rate adjustment.

III. The stock price of Sun Hung Kai drops by 10% due to concerns about the quality of one of its property.

IV. Carrie Lam announces that every Hong Kong citizen will receive a $10,000 cash payout.

A. I and II only B. I and III only C. II and III only D. II and IV only E. III and IV only

5. Which of the following statements are CORRECT concerning a portfolio?

I. A portfolios beta takes value between -1 and +1.

II. A portfolios standard deviation is the weighted average of the standard deviations of the individual securities contained in the portfolio.

III. A portfolios beta is the weighted average of the betas of the individual securities contained in the portfolio.

IV. All else equal, if the correlation between two assets is higher, then the standard deviation of the portfolio that consists 50% of each of these two assets will be lower.

A. I and II only B. II and IV only C. III and IV only D. III only

E. IV only

6. Which of the following statements are NOT consistent with the semi-strong form of the efficient market hypothesis?

I. An individual investor can at best make zero net present value investments if he/she does not know inside information in an efficient market.

II. A star fund manager can at best make zero net present value investments if he/she does not know inside information in an efficient market.

III. A star fund manager can find positive net present value investments by doing fundamental analysis in an efficient market.

IV. People always earn the same return in an efficient market no matter what investment they make.

A. I and III only B. II and IV only C. III and IV only D. I only

E. II only