FINC+600+Week+5+Selected+Practice+Problems[1] - FINC 600...

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FINC 600 Week 5 Selected Practice Problems Chapter 11 1. c 2. Weak, semistrong, strong, strong, weak. 5. 6 - (-.2 + 1.45 X 5) = -1.05%. 6. a . True b . False c . True d . True 7. Decrease. The stock price already reflects an expected 25% increase. The 20% increase conveys bad news relative to expectations. 9. a. Evidence that two securities with identical cash flows (e.g. Royal Dutch b. Small-cap stocks and high book-to-market stocks appear to have given above-average returns for their level of risk. c. IPOs provide relatively low returns after their first few days of trading. d. Stocks of firms that announce unexpectedly good earnings perform well over the coming months. In each case there appear to have been opportunities for earning superior profits. 13. The estimates are first substituted in the market model. Then the result from this expected return equation is subtracted from the actual return for the month to obtain the abnormal return. Abnormal return (Intel) = Actual return – [(−0.57) + (1.08
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This note was uploaded on 04/16/2011 for the course FINANCE 600 taught by Professor Torres during the Spring '11 term at American Public University.

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FINC+600+Week+5+Selected+Practice+Problems[1] - FINC 600...

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