Part I: True/False questions (50 marks] Instructions: For each question, please read the argument carefully and discuss why you agree or disagree with it. You must assess the argument itself rather than other information such as occupations of speakers. Your answer is not subject to any word limit, but a short and concise answer is preferred. Question 1. [10 marks Your friend, Bob, says " The current gold price is $8 per ounce and the one-year forward gold price is $9 per ounce. If you buy gold now and sell the same amount of one year gold forward contract, you can earn profits by $1 per ounce surely. You have to invest in these transactions." Do you agree with Bob? Explain why. Question 2. [10 marks) In the board meeting, the CFO says, "For the interest of shareholders, we must reduce cash holdings. By doing so, we can reduce the net working capital and thus increase the free cash flows." Do you agree with the CFO? Explain why. Question 3. [10 marks] Firm X's debts are risk free. Its treasurer says, "Because our debt is risk free, the interest expense is always paid to our debt holders. Thus, the tax savings from interest expenses are also risk free." Do you agree with the treasurer? Explain why. Question 4. [10 marks) Allfood is an organic grocery chain. It announced a M&A deal to acquire an E commerce firm. After the announcement, the stock price of Allfood drops by 5% over the next three days. An analyst says, "The stock price plunge of Allfood shows that the market does not find an operating synergy in this deal." Do you agree with the analyst? Explain why. Question 5. [10 marks As a CEO, you consider issuing new debts to finance a new project. The CFO says, "I called investment bankers yesterday. They showed very strong interest in our new debt issuance because the Fed is expected to lower the interest rate soon. We should issue a callable bond which allows us to retire the debts at a fixed price if the Fed lowers the rates." Do you agree with the CFO? Explain why