Weekly Homework: Answer the following questions and submit.

· Chapter 8: questions 3, 4, 9 and 12 on page 255 of the text.

· Chapter 9: questions 2, 6, 9 and 11 on page 280 of the text. (3 hours) (W4.1 through W4.5).

Chapter 8

3. Obtain a current quote of McDonald’s (MCD) from the Internet. Describe what has changed since the quote in Figure 8.1. (LG8-2)

4. Get the trading statistics for the three main U.S. stock exchanges. Compare the trading activity to that of Table 8.1. (LG8-2)

9. Describe the difference in the timing of trade execution and the certainty of trade price between market orders and limit orders. (LG8-4)

12. Under what conditions would the constant-growth model not be appropriate?(LG8-5)

Chapter 9

2. Characterize the historical return, risk, and risk-return relationship of the stock, bond, and cash markets. (LG9-

2)

6.Which company is likely to have lower total risk,General Electric or Coca-Cola? Why?(LG9-3)

9. You receive an investment newsletter advertisement in the mail. The letter claims that you should invest in a stock that has doubled the return of the S&P 500 Index over the last three months. It also claims that this stock is a surefire safe bet for the future. Explain how these two claims are inconsistent with finance theory. (LG9-4)

11. Describe the diversification potential of two assets with a −0.8 correlation. What is the potential if the correlation is +0.8? (LG9-5)