DISCUSSION QUESTIONS FOR FINANCE
1) "CAPM" Please respond to the following:
• Suppose investors believe that the standard deviation of the market-index portfolio has increased by 50%. Speculate on two potential implications of CAPM regarding the effect of this change on the required rate of return for a company's investment projects.
• From the e-Activity, compare the returns of the two selected funds for the past 10 years. Determine whether you believe that the single-index CAPM should or should not be rejected. Explain why or why not.
2) "The Efficient Market Hypothesis" Please respond to the following:
• Create an argument for the version of the efficient market hypothesis (i.e., weak, semi-strong, and strong) that you most strongly agree with. Provide support for your position.
• Take a position on the following statement: Highly variable stock prices suggest that the market does not know how to price stocks. Support your answer with examples.