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1. You received some advertisement material in your mail from a local bank. The bank offers you a loan of $100,000 with an APR of 5%. However, the compounding frequency is not specied. Which of the following is true? A. The EAR is the same as APR. B. The EAR can be both higher or lower than 5%. C. The EAR cannot be 6%. D. If you take the loan, then you need to repay $105,000 in a year. E. None of the above. 2. Consider two lotteries A and B. Denote their payoffs as X A and X3, respectively. The payoffs are uncertain, so that X A and X3 are random variables. Let PA and P3 be their prices. Suppose E [X A] = E [X3], Var (X A) > Var (X3), which of the following is NOT true: A. It could be PA > P3 if investors are riskseeking. B. It cannot be PA > P3 if investors are risk-averse. C. PA and P3 can be the same. D. The expected return of A is positive if E [X A] > PA. E. If Var (X3) = 0, then E [X3] /P3 should be the gross interest rate in the economy. 3. Suppose market is in the semi-strong form of efciency, which of the following cannot happen? A. Stocks with high P/ E ratios on average generate higher returns than stocks with low P / E ratios. B. Jane overheard two lawyers talking about an upcoming M&A deal in a bar. She made a prot by placing a trade before the deal was announced. C. Peter started trading last year. He practices technical analysis nding patterns in historical prices to predict future returns. He has never lost money and has been able to generate steady prots. D. A top hedge fund is able to consistently generate trading prots because it hires experienced traders who are able to better interpret news and predict the trends of a number of industries than its competitor funds in the market. E. Mark is always able to predict to future earnings of Microsoft by reading the news