Question: 1. Evaluate whether the following actions are likely to increase stock market efficiency, decrease it, or leave it unchanged, and explain why. A)The government imposes

1. Evaluate whether the following actions are likely to increase stock market efficiency, decrease it, or leave it unchanged, and explain why.

A)The government imposes a transaction tax of 1% on all stock transactions

Increase Efficiency______Decrease Efficiency_______Leave unchanged _______

B)The securities exchange regulators impose a restriction on all short sales to prevent rampant speculation.

Increase Efficiency______Decrease Efficiency_______Leave unchanged _______

C)An option market, trading call and put options, is opened up, with options traded on many of the stocks listed on the exchange.

Increase Efficiency______Decrease Efficiency_______Leave unchanged _______

D)The stock market removes all restrictions on foreign investors acquiring and holding stock in companies.

Increase Efficiency______Decrease Efficiency_______Leave unchanged _______

2. You are valuing an Indian company in rupees. The current exchange rate is Rs 45 per dollar and you have been able to obtain a 10-year forward rate of Rs 70 per dollar. If the U.S. Treasury bond rate is 5%, estimate the riskless rate in Indian rupees.

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