Question 1b: The founder of Vanguard, John Bogle, said: "The idea that a bell rings to signal when investors should get into or out of the market is simply not credible. After nearly 50 years in this business, I do not know of anybody who has done it successfully and consistently." This quote is most closely related to the theory of: Select one: a. Market efficiency. b. Capital structure c. Payout policy. d. Working capital decision. e. Term structure of interest rates. Question 2b: Which of the following statements is NOT correct? A firm's creditors: Select one: a. Lent the firm money. b. Are paid interest. c. Vote at the firm's annual general meeting. d. Have first claim on the firm's assets. e. Are debt holders. Question 3c: Two investors are fully diversified. They have portfolio betas of 0.25 and 0.75 respectively. What do expect is the correlation between their portfolios? Assume that the capital asset pricing model (CAPM) correctly describes asset prices. Select one: a. 1 b. 0.75 c. 0.5 d. 0.25 e. Not enough information. Question 4a: Assume that markets are efficient so all assets are fairly priced. Expected future returns: Hint: CML stands for capital market line. SML stands for security market line. Select one: a. On the SML are perfectly normal and to be expected. b. Below the SML are perfectly normal and to be expected. c. Above the CML are impossible. d. On the CML are possible if the asset is a portfolio of the market portfolio and risk free rate. e. Below the CML are possible and mean that the asset has diversifiable risk. Question 6c: Below is a screenshot from the Reserve Bank of Australia (RBA) website on 11 June 2020: Cash rate target 0.25% 3-year AGS target 0.25% Inflation 2.2% Exchange rates AUD/USD 0.6997 TWI 60.9 Which of the following statements is NOT correct based on this data? Select one: a. If the US Federal Funds rate is 0.125% pa, then over time the AUD would be expected to appreciate against the USD. b. The AUD/USD 0.6997 exchange rate means that one AUD is worth 0.6997 USD. C. TWI stands for Trade Weighted Index. d. Inflation is measured based on the consumer price index (CPI)