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(a) Indicate whether each of the following statements is true or false. Briefly explain why. Statement 1. Periodically, we read about illegal insider trading.

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(a) Indicate whether each of the following statements is true or false. Briefly explain why. Statement 1. Periodically, we read about illegal insider trading. Illegal insider trading is related to a key concept/theory: Information Asymmetry, particularly Moral Hazard. 2. Under ideal conditions, it is important for an investor to estimate future cash flows and predict the relevant interest rate in determining the fair value of a company. 3. The semi-strong form of the Efficient Markets Hypothesis (EMH) suggests, among other things, that all Information, both publicly- available information and inside information, has already been incorporated into the stock price of a public company. 4. The semi-strong form of the Efficient Markets Hypothesis (EMH) is supported by research which demonstrates that Post-announcement Drift (PAD) does not occur. 5. Under ASPE, the historical cost convention is emphasized and, in most cases, gains on assets are recognized only when they are realized. Accordingly, ASPE is very relevant for investors but not very reliable. True or False? Briefly explain why. (b) Fill-in the blank: Compared to fair value accounting, historical cost accounting is generally understood to be more reliable but less relevant. Historical cost accounting focuses on the perspective.

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