Question #1:

Think about our discussion about market bubbles as well as the information in the text from Chapter 8 and Chapter 9. It could be argued that bubbles exist and are beneficial, exist and are detrimental, or do not exist at all, but are rather just small errors in rational evaluation of assets. Explain using examples and logic why this issue has so many possible explanations.

Question #2

Discuss the increase and implications of "high-speed" trading to the best of your understanding. Outline, algorithmic trading, ECNs, market segmentation and Dark Pools. (Please don't just summarize the chapter)

IEX is going through an initial public offering. They want to raise $1.5 B in equity from the IPO. The investment bank is charging the firm an explicit underwriting fee of 6.75%. The offer price on the IPO is set at $40. IEX stock closes the day at $46.31. What is the total cost to IEX for the IPO?

Options. Given the following three scenarios what type of option would you want to use, why?

You think BAC (Bank of America) will have a large judgement against them in court for not maintaining its fiduciary responsibilities to clients.

You own AA, the current price is $14.83 you feel the fundamental value of the firm is $16.25.

You think that X, is undervalued by the market currently. They have an earnings call next week, and you feel their EPS will be greater than the average analyst estimate.

Question #3

What is the biggest difference between the way the S&P 500 and DOW 30 construct their index. (Please don't say it is that one has 500 companies and the other has 30).

You are an investor in XTYC fund. This mutual fund charges a 1.25% management fee at the end of the year on its asset under management in the fund. Consider the following information. What is the NAV of the fund at the end of the year, if the fund has 3,000,000 shares issued and all dividends are cash dispersed to the mutual fund investors (it is January 1st)? What was your return for the year?