Question 91 

Given the following information, what is the required rate of return on Bin Co?

  ♣ inflation premium = 3% 

  ♣ real risk-free rate = 2% 

  ♣ Bin Co. beta = 1.3 

  ♣ market risk premium = 4% 

A) 16.7%.

B) 7.6%.

C) 6.3%.

D) 10.2%.

Question 92 

Which of the following statements concerning market efficiency is least accurate? 

A) If weak-form market efficiency holds, technical analysis cannot be used to earn abnormal returns over the long-run.

B) Tests of the semi-strong form of the EMH require that security returns be risk-adjusted using a market model.

C) Market efficiency assumes that individual market participants correctly estimate asset prices.

D) An informationally efficient capital market is one in which security prices adjust rapidly and completely to new information.

Question 93 

Which of the following statements regarding how structural changes may affect industries is least accurate? 

A) Changes in politics and regulation tend to affect the economy as a whole rather than particular industries.

B) The baby boom generation created a large consumer group which has influenced spending and savings

patterns.

C) Technology has changed both the content and delivery of education.

D) The retailing industry has been significantly affected by the development of the Internet. 

Question 94 

The yield on a company’s 7.5%, $50 par preferred stock is 6%. The value of the preferred stock is closest to: 

A) $12.50.

B) $62.50.

C) $28.75.

D) $50.00.

Question 95 

Which of the following statements is least accurate with regard to the tests for the three forms of the efficient market hypothesis? 

A) The historical performance of professional money managers supports the strong form of the EMH. 

B) Early tests of the semi-strong form measured abnormal returns as the difference between a stock's actual return and the market return.

C) Results of trading rule tests, such as filter rules, support the semi-strong form of the EMH.

D) The tests for the semi-strong form EMH give mixed results. Time-series tests such as dividend yield and default spread reject the semi-strong form EMH and event studies on stock splits and announcements of accounting changes support it.

答案和详解如下：

Question 91 

The correct answer was D) 10.2%. 

Use the capital asset pricing model (CAPM) to find the required rate of return. The approximate risk-free rate of interest is 5% (2% real risk-free rate + 3% inflation premium).

k = 5% + 1.3(4%) = 10.2%.

This question tested from Session 14, Reading 60, LOS a

Question 92 

The correct answer was C) Market efficiency assumes that individual market participants correctly estimate asset prices. 

Market efficiency does not assume that individual market participants correctly estimate asset prices, but does assume that their estimates are unbiased. That is, some agents will over-estimate and some will under-estimate, but they will be correct, on average. 

This question tested from Session 13, Reading 54, LOS a, (Part 2)

Question 93 

The correct answer was A) Changes in politics and regulation tend to affect the economy as a whole rather than particular industries. 

Politics and regulation can have significant effects on particular industries. For example, increasing import duties on steel benefits domestic steel producers but increases costs for industries that use steel. 

This question tested from Session 14, Reading 57, LOS a

Question 94 

The correct answer was B) $62.50. 

The preferred dividend is 0.075($50) = $3.75. The value of the preferred = $3.75 / 0.06 = $62.50. 

This question tested from Session 14, Reading 60, LOS b, (Part 1)

Question 95 

The correct answer was C) Results of trading rule tests, such as filter rules, support the semi-strong form of the EMH. 

Results of trading rule tests, such as filter rules, support the weak form of the EMH.

The other choices are true. Tests show that professional money managers perform no better than a random buy and hold strategy. This supports the strong form EMH contention that stock prices reflect all information, public and private. (Aside from corporate insiders and specialists, no group has monopolistic access to information that would result in superior returns.) 

This question tested from Session 13, Reading 54, LOS b, (Part 3)

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