1. Investors cannot earn excess profits based on the analysis of historical price information. We say that the financial markets are:
strong form efficient.
weak form efficient.
not efficient at any level.
semistrong form efficient.
2. Stock A has an expected return of 16 percent and a beta of 1.4. Stock B has an expected return of 11 percent and a beta of 0.8. Both stocks have the same reward-to-risk ratio. What is the risk-free rate?
2.13 percent
3.26 percent
1.27 percent
4.33 percent