36) An investor's degree of risk aversion will determine his or her A) risk-free rate B) capital allocation line C) optimal risky portfolio D) optimal mix of the risk-free asset and risky asset 37) The historical yield spread between the AA bond and the AAA bond has been 25 basis 37) points. Currently the spread is only 9 basis points. If you believe the spread will soon return to its historical levels, you should A) buy the AA and short the AAA B) buy the AAA and short the AA Q) buy both the AA and the AAA D) short both the AA and the AAA 38) An order to buy or sell a security at the specific price is a A) stop-buy order B) market order C) limit order D) stop-loss order 39) If investors overweight recent performance in forecasting the future, they are exhibiting 39) A) memory bias B) framing error G) overconfidence D) representativeness bias 40) A fund that invests in securities woridwide, including the United States, is called 40) A) a global fund B) an international fund an emerging market fund D) a regional fund 41) Eagle Brand Arrowheads has expected earnings of $1.25 per share and a market capitalization rate of 12%. Earnings are expected to grow at 5% per year indefinitely. The firm has a 40% plowback ratio. By how much does the firm's ROE exceed the market capitalization rate? A) 1% B) 2% C). .5% D) 1.5% 42) If investors are too slow to update their beliefs about a stock's future performance when new evidence arises, they are exhibiting A) conservatism C) representativeness bias B) memory bias D) framing error 3) Moving to higher-yield bonds, usually with longer maturities, is called A) a substitution swap C) a pure yield pickup swap B) a rate anticipation swap D) an intermarket spread swap