1. There are three stocks available: a solar energy firm, an oil firm, and an airline. You can invest in two. Which two?
2. Mr. Wolf calls you with what he says is a tremendous opportunity in the stock market. He has inside knowledge about a pharmaceutical company and he says that the price will go up tomorrow. Of course, you are skeptical and decline his offer.
The next day the price does go up. Mr. Wolf calls again and says not to worry, tomorrow the price will go down and that will be a good time to buy.
Again, you decline. The next day the price does go down. Mr. Wolf calls you over the next several weeks and every time his predictions about the stock price prove to be amazingly accurate.
Finally, he calls to tell you that tomorrow is the big one, the day the price will skyrocket. Mr. Wolf has been accurate many times in a row so you empty your bank account to buy as much stock as possible. The next day the price of the stock goes nowhere. What happened?