Questions from Corporate Finance

Q: Define the three forms of market efficiency.

Define the three forms of market efficiency.

Q: Suppose the market is semistrong form efficient. Can you expect to

Suppose the market is semistrong form efficient. Can you expect to earn excess returns if you make trades based on: a. Your broker’s information about record earnings for a stock? b. Rumors about a me...

Q: You bought one of Bergen Manufacturing Co.’s 7 percent coupon

You bought one of Bergen Manufacturing Co.’s 7 percent coupon bonds one year ago for $1,080.50. These bonds make annual payments and mature six years from now. Suppose you decide to sell your bonds to...

Q: You have $100,000 to invest in a portfolio containing

You have $100,000 to invest in a portfolio containing Stock X, Stock Y, and a risk-free asset. You must invest all of your money. Your goal is to create a portfolio that has an expected return of 11.2...

Q: Suppose you have been hired as a financial consultant to Defense Electronics

Suppose you have been hired as a financial consultant to Defense Electronics, Inc. (DEI), a large, publicly traded firm that is the market share leader in radar detection systems (RDSs). The company i...

Q: Imagine that a particular macroeconomic variable that influences your firm’s net earnings

Imagine that a particular macroeconomic variable that influences your firm’s net earnings is positively serially correlated. Assume market efficiency. Would you expect price changes in your stock to b...

Q: Suppose the returns on long-term government bonds are normally distributed

Suppose the returns on long-term government bonds are normally distributed. Based on the historical record, what is the approximate probability that your return on these bonds will be less than 23.7 p...

Q: Based on the following information, calculate the expected return and standard

Based on the following information, calculate the expected return and standard deviation of each of the following stocks. Assume each state of the economy is equally likely to happen. What are the cov...

Q: Assuming that the returns from holding small company stocks are normally distributed

Assuming that the returns from holding small company stocks are normally distributed, what is the approximate probability that your money will double in value in a single year? Triple in value?

Q: Is the following statement true or false? A risky security cannot

Is the following statement true or false? A risky security cannot have an expected return that is less than the risk-free rate because no risk-averse investor would be willing to hold this asset in eq...