9.2 Which of the following facts, if true, would violate the weak form of the ef

9.2 Which of the following facts, if true, would violate the weak form of the efficient markets hypothesis?
1. Stocks earn higher returns than bonds over time.
2. You can earn better-than-average returns by purchasing a stock any time it reaches a 52-week high.
3. You can earn higher returns by investing in tech stocks than by investing in stocks of food companies.
9.4 Listed in the table are data that pertain to the corporate bond market. (Note: Each “period” covers a span of six months.)
1. Compute the confidence index for each of the four periods listed in the table.
2. Assume that the latest confidence index (for period 0, in effect) amounts to 86.83%, while the yield spread between high- and average-grade corporate bonds is 85 basis points. Based on your calculations, what’s happening to bond yield spreads and the confidence index over the period of time covered in the problem (i.e., from period 0 through period 4)?
3. Based on the confidence index measures you computed, what would be your overall assessment of the stock market? In which one or more of the periods (1 through 4) is the confidence index bullish? In which one(s) is it bearish?
Period 1 Period 2 3 4
Avg yield 10 bonds 5.30 5.70 5.10 ?
Yield on the Dow Jones average of 40 bonds 6.50 ? 6.00 4.90
Yield spread in basis points ? 155 ? 25
Confidence Index ? ? ? ?
9.6 Following are figures representing the number of stocks making new highs and new lows for each month over a six-month period:
Month New Highs New Lows
JULY 42 22
AUGUST 59 34
SEPTEMBER 70 41
OCTOBER 64 29
NOVEMBER 73 33
DECEMBER 85 35
Would a technical analyst consider the trend to be bullish or bearish over this period? Explain.
9.9 You are given the following information for the number of stocks making new highs and new lows for each day:
DAY NEW HIGH NEW LOW
1 117 22
2 95 34
3 84 41
4 64 79
5 53 98
6 19 101
7 19 105
8 18 110
9 19 90
10 22 88
• Calculate the 10-day moving-average NH-NL indicator.
• If there are 120 new highs and 20 new lows today, what is the new 10-day moving-average NH-NL indicato
9.11 You are presented with the following data (dollars in trillions):
MONTH MUTUAL FUND CASH POSITION MUTUAL FUND TOTAL ASSETS
JANUARY .929 18.753
FEBRUARY .956 18.903
MARCH .983 19.054
APRIL 1.015 19.207
MAY 1.048 19.360
Calculate the MFCR for each month. At the end of May, are you bullish or bearish?
10.1 A 9%, 20-year bond is callable in 12 years at a call price of $1,090. The bond is currently priced in the market at $923.68. What is the issue’s current yield?
10.3 Buck buys a 7.5% corporate bond with a current yield of 4.8%. How much did he pay for the bond?
10.6 Janice Wilcox is a wealthy investor who’s looking for a tax shelter. Janice is in the maximum (37%) federal tax bracket and lives in a state with a very high state income tax. (She pays the maximum of 12.3% in state income tax.) Janice is currently looking at two municipal bonds, both of which are selling at par. One is a AA-rated, in-state bond that carries a coupon of 6.375%. The other is a AA-rated, out-of-state bond that carries a 7.125% coupon. Her broker has informed her that comparable fully taxable corporate bonds are currently available with yields of 9.75%. Alternatively, long Treasuries are now available at yields of 9%. She has $100,000 to invest, and because all the bonds are high-quality issues, she wants to select the one that will give her maximum after-tax returns.
1. Which one of the four bonds should she buy?
2. Rank the four bonds (from best to worst) in terms of their taxable equivalent yields.
10.10 Caleb buys an 8.75% corporate bond with a current yield of 5.6%. When he sells the bond one year later, the current yield on the bond is 6.6%. How much did Caleb make on this investment?
10.12 Rhonda purchased a 12%, zero-coupon bond with a 20-year maturity and a $15,000 par value 20 years ago. The bond matures tomorrow. How much will Rhonda receive in total from this investment, assuming all payments were made on these bonds as expected?
10.16 A certain convertible bond has a conversion ratio of 19 and a conversion premium of 15%. The current market price of the underlying common stock is $30. What is the bond’s conversion equivalent?