BUSI 2504 Study Guide - Interest Rate Risk, Fisher Equation, Win-Win Game

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Lo1 how to calculate the return on investment. Lo2 the historical returns on various important types of investments. Lo3 the historical risks on various important types of investments. Answers to concepts review and critical thinking questions. Also, speculators provide liquidity to markets and thus help to promote efficiency. (lo4) a. b. c. If the market is not weak form efficient, then this information could be acted on and a profit earned from following the price trend. Under 2, 3, and 4, this information is fully impounded in the current price and no abnormal profit opportunity exists. Under 2, if the market is not semi-strong form efficient, then this information could be used to buy the stock cheap before the rest of the market discovers the financial statement anomaly. Since 2 is stronger than 1, both imply that a profit opportunity exists; under 3 and 4, this information is fully impounded in the current price and no profit opportunity exists.