compute problem 10 for me please.

PART 8 Topics in Corporate Finance E M NA your next coin flip? Suppose you flipped a head on your ninth toss. What is the prob- ability of flipping a head on your tenth toss? 6. Performance of the Pros (L04) In the mid- to late-1990s, the performance of the pros was unusually poor on the order of 90 percent of all equity mutual funds un- derperformed a passively managed index fund. How does this fact bear on the issue of market efficiency? 7. Efficient Markets Hypothesis (L04) The efficient markets hypothesis implies that all mutual funds should obtain the same expected risk-adjusted returns. There- fore, we can pick mutual funds at random. Is this statement true or false? Explain. 8. Evidence on Market Efficiency (L04) Some people argue that the efficient mar- kets hypothesis cannot explain the 1987 market crash or the high price-to-earnings ratio of Internet stocks during the late 1990s. What alternative hypothesis is currently used for these two phenomena? 9. Behavioral Finance and Efficient Markets [L04] Proponents of behavioral finance use three concepts to argue that markets are not efficient. What are these arguments? 10. Frame Dependence [LO2] In the chapter, we presented an example where you have lost $78 and are given the opportunity to make a wager in which you have an 80 percent chance that your loss will increase to $100 and a 20 percent chance that your loss will decrease to $0. Using the stand-alone principle from capital budgeting, explain how your decision to accept or reject the proposal could have been affected by frame dependence. In other words, reframe the question in a way in which most people are likely to analyze the proposal correctly. pani caus One howe more $29.6 financ Learr After L01 ASE LO2 01(k) Account at S&S Air been at your job with S&S Air for a week now and ded you need to sign up for the company's 401(k) n after your discussion with Audrey Sanborn, the Financial Services representative, you are still unsure ch investment option you should choose. Recall that ms available to you are stock in S&S Air, the Bledsoe Index Fund, the Bledsoe Small Cap Fund, the Large-Company Stock Fund, the Bledsoe Bond Fund. Bledsoe Money Market Fund. You have decided that uld invest in a diversified portfolio, with 70 percent of estment in equities, 25 percent in bonds, and 5 percent money market fund have also decided to focus your equity investment on ap stocks, but you are debating whether to select the > Index Fund or the Large Company Stock Fund. In g it over, you understand the basic difference in the two One is a ely passive fund that replicates a widely ed large-cap index, the S&P 500, and has low fees. The actively managed with the intention that the skill of the Bio manager will result in improved performance relative andex Fees are higher in the latter fund. You're just not certain which way to go, so you ask Chris Guthrie, who works in the company's finance area, for advice. After discussing your concerns. Chris gives you some in- formation comparing the performance of equity mutual funds and the Vanguard 500 Index Fund. The Vanguard 500 is the world's largest equity index mutual fund. It replicates the S&P 500, and its return is only negligibly different from the S&P 500. Fees are very low. As a result, the Vanguard 500 is essent tially identical to the Bledsoe S&P 500 Index Fund offered in the 401(k) plan, but it has been in existence for much longer, so you can study its track record for over two decades. Chris suggests that you study Figure 22.10 and answer the following questions Fo All business Dvious, whi managemen cially sensible to manage ris a holistic, inte QUESTIONS 1. What implications do you draw from the graph for mutual fund investors? 2. Is the graph consistent or inconsistent with market effi- ciency? Explain carefully 3. What investment decision would you make for the equity portion of your 401(k) account? Why? There is much Vhe company lear, many co Mficer (CRO) Broadly spes side forces om such things