between returns on stocks and government bonds is known as A) the equity risk premium B) the risk and return tradeoff. C) the maturity premium. D) the risk/reward paradox. Answer 6. Each of the following would tend to weaken the Efficient Market Hypothesis EXCEPT A) There is publicly available information that Boeing Aircraft has procured a contract to build 25 planes for the U.S. Government and the price of Boeing quickly goes up. B) ACG, Inc. performed well for the past six months, but they just lost a major distribution contract, but the price of ACG stock continues to go up. gger, Inc, gets a contract to supply bats for Little League play, a contract it never had stock price remains stable. before, and D) Muguet Company consistently underperforms the market in October, but outperforms the market in May Answer: 7. Which of the following is consistent with the efficient market hypothesis? A) so-called value stocks outperform growth stocks. B) stocks that have performed well over the past year continue to perform well for several more months. C) a company announces higher than expected sales and earnings. The stock price immediately increases by1096. D) a company announces higher than expected sales and earnings. The stock price remains unchanged. Answer 8. You are considering investing in U.S. Steel. Which of the following is an example of nondiversifiable risk? A) Risk resulting from foreign expropriation of US. Steel property B) Risk resulting from oil exploration by Marathon Oil (a U.S. Steel subsidy) C) Risk resulting from a strike against U.S. Steel D) None of the above Answer 9. If there is a 20% chance we will get a 16% return, a 30% chance of getting a 14% return, a 40% chance of getting a 12% return, and a 10% chance of getting an 8% return, what is the expected rate of return? B) 13% A) 12% C) 14% D) 15% Answer 10. Changes in the general economy, such as changes in interest rates or tax laws, represent what ty risk? A) Firm-specific risk B) Market risk pe of C) Unsystematic risk