1. ART has come out with a new and improved product. As a result, the firm projects an ROE of 25%, and it will maintain a plowback ratio of 0.25. Its earnings this year will be $2.0 per share. Investors expect a 17% rate of return on the stock. What price do you expect ART shares to sell for in 4 years?

$16.74

$27.89

$17.78

$19.78

2. Which of the following statements related to market efficiency tends to be supported by current evidence?

I. Markets tend to respond quickly to new information.

II. It is fairly easy for the typical investor to earn above-average returns without taking above-average risks.

III. Short-run prices are able to predict accurately based on public information.

IV. Markets are most likely semi-strong-form efficient. (Points : 3.5)

I and III only

II and IV only

I and IV only

I, III and IV only

I, II and III only