1) Describe what a stock market bubble is, give an example. Then explain why they are costly to our economy.
2) Which type of index better reflects the changes in the economy’s wealth, price weighted or valueweighted? Why?
3) Why are future price movements unpredictable if the theory of efficient markets is true?
4) How is the volatility of the underlying asset price related to the time value of an option?
5) What is the difference between a forward and a futures contract?