# answerkey_midterm2 - Question 1 Solve the following...

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Question 1 Solve the following equations: 1 = 0.25 + 0.2 + x + y 1 = 0.25*0.8 + 0.2*1.3 + x*1.5 +y*0 (i) \$343,333 (ii) \$206,667 (iii) 0 Question 2 Expected Return A = 10.8% Expected Return B = 9.33% Standard Deviation A = 3.8% Standard Deviation B = 12.02% Covariance A and B = 45.39(%) 2 Correlation Coefficient A and B = 0.993 Question 3 a) This reaction is not and evidence that the Argentinean stock market is not semi-strong form efficient. By the contrary, the fact that the price of the stock adjusted quickly (only minutes after the announcement) suggests that the market is semi-strong form efficient. The fact that the price increased, rather than decreased would only mean that the investors considered this to be positive news to the firm. b) Being the market semi-strong form efficient, the price already incorporated the effects coming from the change in management of the company. Therefore, all the abnormal returns coming from this information have already been exploited. So future investors of this company will not

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answerkey_midterm2 - Question 1 Solve the following...

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