4. One day while working at an investment firm, you turn in some empirical estimations of stock returns for the next quarter. Your boss comes across this line in your report, "The expected return for stocks of the 'Fly-by-Night Fidget Spinner Co.' = 5% plus the risk-free return (currently.01%) plus twice the difference between the market rate of return and the risk-free rate." Upon seeing this your boss says, "Brilliant! I'm ordering a thousand shares in this company immediately!" and picks up the phone. You slap the phone out of his hand before he can make the call. a. Give your best explanation, based on what we have learned in class, as to why your boss was so interested in buying shares of this company. b. What valid econometric reason(s) will you give your boss for slapping the phone out of his hand? 5. Suppose Ivan the investor wants to short sell some stocks. He tells his broker, Bill, to sell 80 shares of Disney at $45 each. a. If Ivan must deposit $1,260 before Bill undertakes this action, what is the actual margin? b. Now suppose that the price per share falls to $40. If Ivan instructs Bill to repurchase the shares at this price, and Bill charges $100 total, how much money did Ivan make? (Remember, do not include the money Ivan had to deposit in his net profit)