CHAPTER 12 - CHAPTER 12 SOME LESSONS FROM CAPITAL MARKET...

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CHAPTER 12 SOME LESSONS FROM CAPITAL MARKET HISTORY Answers to Concepts Review and Critical Thinking Questions 1. They all wish they had! Since they didn’t, it must have been the case that the stellar performance was not foreseeable, at least not by most. 2. As in the previous question, it’s easy to see after the fact that the investment was terrible, but it probably wasn’t so easy ahead of time. 3. No, stocks are riskier. Some investors are highly risk averse, and the extra possible return doesn’t attract them relative to the extra risk. 4. On average, the only return that is earned is the required return—investors buy assets with returns in excess of the required return (positive NPV), bidding up the price and thus causing the return to fall to the required return (zero NPV); investors sell assets with returns less than the required return (negative NPV), driving the price lower and thus causing the return to rise to the required return (zero NPV). 5.
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This note was uploaded on 09/08/2009 for the course FIN 311 taught by Professor Layish during the Spring '08 term at Binghamton University.

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CHAPTER 12 - CHAPTER 12 SOME LESSONS FROM CAPITAL MARKET...

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