A+ Graded Paper
BUS 320 – Final Exam #3 Bundle | Graded
Materials with Correct Answers
Questions and Mark scheme
Version: Final 1.1
, Random price movements (i.e. unpredictable price changes) indicate that ________.
a.investors are irrational
b.technical analysis to uncover trends can be quite useful
c.stock prices respond very slowly to both new and old information
d.markets are functioning efficiently - ✔✔d.markets are functioning efficiently @
It is well known that the stock market efficiently incorporates information. Which of the
following statements is INCORRECT (does not make sense) assuming that the stock
market is semi-strong form efficient.
a."The reported earnings of Caterpillar was much higher than investors; expectations.
Therefore, the Caterpillar stock price increased sharply in response to the earnings
news"
b. "It is expected that the oil price increase will boost profits of Exxon Mobil during the
next quarter. Therefore, Exxon Mobil's stock price should appreciate during the next
quarter."
c."Everyone expects the Federal Reserve to announce an increase of the interest rate
tomorrow. Therefore, the announcement may not affect stock prices tomorrow"
d."When the stock prices incorporate information efficiently, stock prices behave like
random walks, i.e., their price changes (or returns) are difficult to predict." - ✔✔b. "It is expected that the oil price
increase will boost profits of Exxon Mobil during the
next quarter. Therefore, Exxon Mobil's stock price should appreciate during the next
quarter." @
The Baby Bell Corporation's common stock has a beta of 1.1. If the risk-free rate is 6
percent and the expected return on the market is 13 percent, what is Baby Bell's cost of
equity capital?
BUS 320 – Final Exam #3 Bundle | Graded
Materials with Correct Answers
Questions and Mark scheme
Version: Final 1.1
, Random price movements (i.e. unpredictable price changes) indicate that ________.
a.investors are irrational
b.technical analysis to uncover trends can be quite useful
c.stock prices respond very slowly to both new and old information
d.markets are functioning efficiently - ✔✔d.markets are functioning efficiently @
It is well known that the stock market efficiently incorporates information. Which of the
following statements is INCORRECT (does not make sense) assuming that the stock
market is semi-strong form efficient.
a."The reported earnings of Caterpillar was much higher than investors; expectations.
Therefore, the Caterpillar stock price increased sharply in response to the earnings
news"
b. "It is expected that the oil price increase will boost profits of Exxon Mobil during the
next quarter. Therefore, Exxon Mobil's stock price should appreciate during the next
quarter."
c."Everyone expects the Federal Reserve to announce an increase of the interest rate
tomorrow. Therefore, the announcement may not affect stock prices tomorrow"
d."When the stock prices incorporate information efficiently, stock prices behave like
random walks, i.e., their price changes (or returns) are difficult to predict." - ✔✔b. "It is expected that the oil price
increase will boost profits of Exxon Mobil during the
next quarter. Therefore, Exxon Mobil's stock price should appreciate during the next
quarter." @
The Baby Bell Corporation's common stock has a beta of 1.1. If the risk-free rate is 6
percent and the expected return on the market is 13 percent, what is Baby Bell's cost of
equity capital?
