Question $2$

Berk and DeMarzo $(2020)$ provide the following quotation $($see below$).$ Indicate what is implied in this quote and what ramifications it has for our understanding of finance and market efficiency. Include at least two citations that support your response.

A finance professor and a student are walking down a street. The student notices a $$100$ bill lying on the pavement and leans down to pick it up$.$ The finance professor immediately intervenes and says, $$Don$$t bother; there is no free lunch. If that were a real $$100$ bill lying there, somebody would already have picked it up$!($Berk & DeMarzo, $2020,$ p$.81).$

Question $3$

To understand how bonds work and how they are priced, we have to have an understanding of what determines a bond$$s price. One of the most important factors to consider when pricing bonds is the prevailing market rate of interest for bonds of similar risk in terms of duration and quality. In your response to this question, you should highlight the relationship between bond prices and interest rates and indicate what risks are considered when we price bonds. Include at least two citations that support your response.

Question $4$

Berk and DeMarzo $(2020)$ introduced us to some evidence that although in aggregate we believe that markets are efficient, when we examine individual behavior or even the behavior of people in groups, we find at times systemic departures from efficient market behavior. Highlight two biases $($in bold$)$ that they identified in this chapter and indicate what problems these biases may cause for the Capital Asset Pricing Model $($CAPM$).$