Please answer all or none! Thank You.

4

a. GM announces it has invented a car that not only drives you places, but also has an interesting side effect...if you sit in the car for 20 minutes a day, it cures all diseases you may have (including horrible diseases such as cancer and heart disease). GM stock the next day soars to $5,000 per share. What is the MOST accurate explanation of HOW and WHY GM stock went up?

	Computers estimate what the new price will be based on a set of known variables and several reliable valuation models.
	Technicians at the stock markets used the growth stock model as well as the capital asset pricing model to calculate the new price.
	The stock exchanges estimated the new stock price based on other past historical incidents similar to GM.
	High demand for the stock (and low supply...since no one was selling) caused the price to increase until a point of equilibrium was reached (meaning there were now enough suppliers or sellers of the stock).

b. Which form of the efficient market hypothesis causes one to believe that there is not an advantage to insider trading, based on insider information?

	Semi-strong form
	Strong form
	Weak form
	Private information form

c. A significant flaw in the payback method of capital budgeting is that____________

	it is calculated using arithmetic average instead of weighted moving average.
	it assumes future cash flows are reinvested at the IRR.
	it ignores cash flows following the payback period.
	it only calculates present values prior to comparing them to investment amount. d. A project will cost $20,000 in total investment. The cash flows are as follows: Year 1: $5,000 Year 2: $3,000 Year 3: $6,000 Year 4: $8,000 Year 5: $7,000. Assume the cash flows are distributed evenly throughout the year. Calculate the exact payback period.