1. money market means
short term - less than a
year. Ans is D
Remember you are short, so you
are afraid of prices going up. You
should try to limit your losses by
buying back when prices go up
too much. Ans is D
Just remember what
makes a market more
efficient? Ans is C

2. The govt is competing with the
private sector for $. So if the
supply of $ goes down, interest
rate shd go up
$ supply goes up, interest rates goes down.
So dd for goods and investment shd go up
since it is now cheaper (in short term) but if
productivity does not go up, inflation will set
in, in the long run. Ans is A

3. Ans shd be B since it is risk vs returns
tradeoffs which is objectives
+v NPV means that the
project is returning more
than what shareholders
expect. So remember to
get PVGO, you need a
higher ROE than Ke.
Ans is B

4. This, you shd know very
well. An indiff curve is
where all portfolios have
the same utility value so it
must be ans C
Remember you can
seldom borrow at the
same rate as u can invest
in? Ans is B
B is also right since
inflation could impact your
returns and so it is a risk
factor to consider

5. This was done in your assignment. The slope
of the regression line was beta, with the y-axis
as excess stock returns and x-axis as excess
market returns
Not in syllabus but answer is D
since both provides a risk
premium determination on
factors that impact the stock.
Ans is A since we only
compensate for sys risk
but not unsys risks since it
can be diversified away.
So it must be a proportion
of market risk
Not in syllabus, ans is C

6. Ans is B. Recall Sharpe
formula? (Ri - Rf)/sigma,
so since everything is the
same, it must be the same
sharpe ratio
B is correct but so is C. Since a call is
S - X, obviously if S is $40, C would
be lower.