1. According to the Efficient Markets Hypothesis (EMH):
a. An asset’s price reflects all information about future
economic fundamentals affecting the asset’s value.
b. An asset’s price reflects all publicly available
information about future economic fundamentals affecting the
asset’s value.
c. An asset’s price reflects the amalgamation of the
expectations of all investors in the market regarding the future
economic fundamentals affecting the asset’s value.
d. None of the above
2. First National Bank is somehow able to borrow money at an
interest rate of 4% while lending at a rate of 8%. Therefore, the
bank can be said to be engaging in interest rate:
a. Manipulation
b. Arbitrage
c. Speculation
d. Fraud
3. Your town assessor has sent you a notice stating that your
home has been appraised at a value of $500,000 for purposes of
property taxes. Your home has 4 bedrooms, 3 bathrooms, is 2,000
square feet and lies on a 1-acre parcel. A house on the opposite
side of your block with 5 bedrooms and 4 bathrooms, is 3,000 square
feet and lies on a 1.2-acre parcel. This home sold last year for
$400,000. Based on these facts, which of the following is your
WORST argument to the town assessor to lower the value of your
home’s assessed value based on the lower sale price of the other
home?
a. The other home that was recently sold is in the same
location
b. The other home that was recently sold has one more bedroom
and bathroom than yours
c. The other home that was recently sold rests on a larger
parcel
d. The other home that was recently sold is 50% larger than
your home
4. Explain in a few sentences what would happen according to
the Law of One Price to the supply and demand if identical assets
were priced differently in two different regions. (3 pts.)
5. List the three potential sources for companies of new ideas
for investment projects: (3 pts)
1.)
2.)
3.)