problemset5 - Problem Set 5 Ec 136, Fall 2009 This problem...

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Problem Set 5 Ec 136, Fall 2009 This problem set is due Thursday October 29, in class. Sorry, no late problem sets are accepted! All students must submit problem sets individually. Please write your name, section time and GSI on the front page of your solution. 1. Mutual fund expenses www.google.com/±nance and type SPIAX to get the information page about the Morgan Stanley fund. Scroll down to see "Key statistics" on the right. How much is the front load? The deferred load? The (annual) expense ratio? What are the corresponding fees for VFINX? Suppose you plan to invest $10,000 for 3 years, and the annual return on the stocks held in the fund portfolio will be 7% per year for both funds. How much money do you end up with at the end of the three years (after paying the fund fees) if you invest in SPIAX? What if you invest in VFINX? What is the annual return (after taking out expenses) you will have earned if you invest in either of these funds? 2. E¢ cient markets Are the following statements true or false? Explain your answer in no more than two sentences. (a) Good News, Inc., just announced an increase in its annual earnings, yet its stock price fell. This may be consistent with the e¢ cient markets hypothesis. (b) If the stock market is e¢ cient in the semi-strong sense, there should be, on average, no increase in a company²s stock price before the company announces good news about its business. (c) If risky stocks on average have higher returns than safe stocks, the e¢ cient market
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This note was uploaded on 11/24/2009 for the course ECON 136 taught by Professor Szeidl during the Fall '08 term at University of California, Berkeley.

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problemset5 - Problem Set 5 Ec 136, Fall 2009 This problem...

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