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#Question A) Economists often refer to the stock market as an efficient market, By this they mean that the competition to find the misvalued stocks

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A) "Economists often refer to the stock market as an efficient market, By this they mean that the competition to find the misvalued stocks is intense, So, when new information comes out, investors rush to take advantage of it and therefore eliminate any profit opportunities."

#1A- Explain the term "Efficient market' and distinguish THREE (3) forms of the Efficient Market Hypotheses (EMH).

B) If the rate of return available on risk-free assets is 4% and you expect the rate of return of the market portfolio to be 14%.

#1B- What expected rate of return would you demand before you would be willing to invest in this mutual fund?

#2B- Is this fund attractive? Why?

#3B- How could you mix mutual fund with a risk-free position in Treasury bills to create a portfolio with the same managers but with a higher expected rate of return? what is the rate of the return of the portfolio?

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