1. For the financial markets to be inefficient:
A. at least the majority of the investors must be overly optimistic.
B. the collective irrational trading of some investors must exceed the corrective arbitrage trading of the remaining inv.
C. arbitrage trading must be prohibited.
D. each irrational investor must act independently of every other irrational investor.
E. irrational investors must become arbitrage traders.
2. A bond has a modified duration of 4.6 and yield to maturity of 8.9 percent. If interest rates decline by one-quarter of a percent, the bond's price will increase by _______ percent.
A. 0.72
B. 1.15
C. 1.23
D. 1.37
E. 1.08