Qualitative Questions

Which of the following set of conditions will result in a bond with the greatest price volatility?

A$)$ A high covpon and a long maturity

B$)$ A high coupon and a short maturity

$($Q$)$ A low coupon and a short maturity

$($D$)$ A low coupon and a long maturity

Fintech Corp issues two bonds with $20-$year maturities. Both bonds are callable at $$1,050.$ The first bond is issued at a deep discount with a coupon rate of $4\%$ and a price of $$480$ to yield $8\mathrm{.}4\%.$ The second bond is issued at par value with a coupon rate of $9\mathrm{.}00\%.$

If you expect rates to fall substantially in the next two years, which bond would you prefer to hold?

A$)$ The former

B$)$ The latter

C$)$ both are equivalent $.$

Which of the following statement would most appear to contradict the proposition that the stock market is weakly efficient?

A$)$ Over $25\%$ of mutual funds outperform the market on average.

B$.$ Insiders earn abnormal trading profits

C$)$ Every January, the stock market earns abnormal returns.

D$)$ There are hedge funds with positive returns as many as ones with negative returns

Suppose that, affer conducting an analysis of past stock prices, you come up with the following observations. Which would appear to contradict the weak form of the efficient market hypothesis?

A$)$ The average rate of return is significantly greater than zero.

B$)$ The correlation between the return during a given week and the return during the following week is zero.

One could have made superior returns by buying stock after a $10\%$ rise in price and selling after a $10\%$ fall.

D$)$ One could have made higher$-$than$-$average capital gains by holding stocks with low dividend yields.