【正文】 future? That is, as an example, if you buy small stocks will your investment always outperform . Treasury bonds? The student should realize that we are working with averages, so they should not expect riskier assets to always outperform less risky assets. The student should explain somewhere in their answer that this gets to the heart of what risk is. That is, the reason you expect to earn a higher return over the long haul is that your variability in price from year to year can be significant.RISK AND RETURN86. Suppose you have $30,000 invested in the stock market and your banker es to you and tries to get you to move that money into the bank’s certificates of deposit (CDs). He explains that the CDs are 100% government insured and that you are taking unnecessary risks by being in the stock market. How would you respond? The usual response is that bank CDs typically will offer a very low rate of return because of their low level of risk. Even if students do not know the relationship between yields on CDs and historical returns on stocks, they should recognize that because of the risk differences the CDs must have a lower expected return. So, if the investor in the question is willing to trade off some safety in order to have the chance to earn larger returns, the stock market is the correct investment.MARKET EFFICIENCY87. Suppose your cousin invests in the stock market and doubles her money in a single year while the market, on average, earned a return of only about 15 percent. Is your cousin’s performance a violation of market efficiency? No, market efficiency does not preclude investors from “beating the market.” It is entirely possible to earn higher returns than the market at times. However, if your cousin is able to do so consistently, then there would certainly be some doubt cast upon market efficiency.INSIDER TRADING88. How do you think the stock market would be affected if the laws were changed so that trading on insider information was no longer illegal? What would be the impact on the goal of the financial manager if such a change were to occur? This openended question allows students to ponder market efficiency from a different angle. By allowing insiders to trade on their information, it。 percent d. percent。 percent e. percent。 accuratelyMARKET EFFICIENCYd 46. In an efficient market, the price of a security will: a. always rise immediately upon the release of new information with no further price adjustments related to that information. b. react to new information over a twoday period after which time no further price adjustments related to that information will occur. c. rise sharply when new information is first released and then decline to a new stable level by the following day. d. react immediately to new information with no further price adjustments related to that information. e. be slow to react for the first few hours after new information is released allowing time for that information to be reviewed and analyzed.MARKET EFFICIENCYc 47. If the financial markets are efficient, then investors should expect their investments in those markets to: a. earn extraordinary returns on a routine basis. b. generally have positive net present values. c. generally have zero net present values. d. produce arbitrage opportunities on a routine basis. e. produce negative returns on a routine basis.MARKET EFFICIENCYd 48. Which one of the following statements is correct concerning market efficiency? a. Real asset markets are more efficient than financial markets. b. If a market is efficient, arbitrage opportunities should be mon. c. In an efficient market, some market participants will have an advantage over others. d. A firm will generally receive a fair price when it sells shares of stock. e. New information will gradually be reflected in a stock’s price to avoid any sudden change in the price of the stock. MARKET EFFICIENCYc 49. Financial markets fluctuate daily because they: a. are inefficient. b. slowly react to new information. c. are continually reacting to new information. d. offer tremendous arbitrage opportunities. e. only reflect historical information.MARKET EFFICIENCYd 50. Insider trading does not offer any advantages if the financial markets are: a. weak form efficient. b. semiweakform efficient. c. semistrongform efficient. d. strongform efficient. e. inefficient.MARKET EFFICIENCYe 51. According to theory, studying historical prices in order to identify mispriced stocks will not work in markets that are _____ efficient. I. weakform II. semistrongform III. strongform a. I only b. II only c. I and II only d. II and III only e. I, II, and IIIMARKET EFFICIENCYe 52. Which of the following tend to reinforce the argument that the financial markets are efficient? I. Information spreads rapidly in today’s world. II. There is tremendous petition in the financial markets. III. Market prices continually fluctuate. IV. Market prices react suddenly to unexpected news announcements. a. I and III only b. II and IV only c. I, II, and III only d. II, III, and IV only e. I, II, III, and IVMARKET EFFICIENCYa 53. If you excel in analyzing the future outlook of firms, you would prefer that the financial markets be ____ form efficient so that you can have an advantage in the marketplace. a. weak b. semiweak c. semistrong d. strong e. perfectMARKET EFFICIENCYc 54. Your best friend works in the finance office of the Delta Corporation. You are aware that this friend trades Delta stock based on information he overhears in the office. You know that this information is not known to the general public. Your friend continually brags to you about the profits he earns trading Delta stock. Based on this information, you would tend to argue that the fina