1. What is a speculative "bubble"? In your opinion, have the changes in the price of Bitcoin represented a bubble? (To answer this question, you may wish to use information from the lecture, from the posted readings, or other sources. You may wish to check recent price movements.)
2. Here are descriptions of four potentially promising investment opportunities. Based on the information provided, which do you think is the most attractive? Justify your answer by explaining what makes each opportunity attractive or unattractive.
3. (a)You are a physician and read that Pharmaceutical Company A has just obtained approval to
4. sell a new drug. You happen to be a specialist in the disease that the drug treats and have participated in the field trials of the drug and have detailed knowledge of the data from those trials, and based on those data believe that the new drug is a extraordinary advance in the treatment of that disease.
5. (b)YoureadintheWallStreetJournalthattheinsidersofCompanyB,includingtheCEOand CFO, have been buying large quantities of the shares of Company B.
6. (c)The price of Company C's stock has been jumping upward, in a pattern that, historically, suggests large future gains.
7. (d)AftercarefulstudyofCompanyD'sfinancialreports,itappearsthatitsprofitsandprofit growth are unusually high relative to its share price, suggesting that its share price is underestimating the company's fundamental value.
8. Each part of this question asks you to compare two assets that are similar in most respects but have one significant difference. In each case, which asset is likely to offer the higher rate of return, or is there no reason to expect one to offer higher returns than the other?
9. Two corporate bonds: one is issued by a corporation with large financial reserves; the other is issued by a corporation that seems solvent but has had some recent financial difficulties.
10. Two U.S. Treasury bonds: one matures in two years; the other matures in ten years.
11. Two pieces of undeveloped land: one is small and suitable for a house; the other is large and suitable for a small shopping center.
12. Two minerals: one is traded in high volume on the major commodity exchanges; the other is traded in much smaller volume by a small number of specialized dealers.
13. (a) Compare the fundamental values of dollars, Euros, Bitcoin, and gold.
14. (b) Compare the relative advantages of dollars and Bitcoin as media of exchange, in the short term. Then answer the same question, considering the long term.
15. Suppose that, after their meeting in March, the Federal Reserve leaves target interest rates unchanged but states that it now sees an increased likelihood that rate increases may be appropriate later in the year. What immediate effect (if any) do you expect on: mortgage interest rates, stock prices, bond prices, housing prices, Van Gogh's paintings, corporations' plans to build new factories?
16. Suppose that you are a consultant advising a pharmaceutical company on whether to begin a major research project, to find new antibiotics.
17. (a)Whatkindofmathematicalcalculationwouldhelpyoutomakeyourrecommendation?
18. (b)Howwouldtheriskinessoftheprojectenterthecalculationandwouldyoubemoreorless
19. likely to recommend a riskier project?
20. (c)If market interest rates rose, then how would that enter the calculation and would you be
21. more or less likely to recommend the project?
22. (d)Howwouldthelengthoftheresearchprogramenterthecalculationandwouldyoube
23. more or less likely to recommend a project that would be slower to bring a drug to market?
24. What specific steps has the U.S. government taken, historically and currently, to support the value of the dollar and try to ensure that people continue to accept that value?