PLEASE SEE ATTACHMENT BELOW AND PLEASE ANSWER E and F COMPLETELY Thanks noise ra er risk can become an important deterrent to arbitrage activity e) 15 marks) An important test of the efficient market hypothesis is whether some investors can persistently outperform the market Suppose that in any given year, there is a 50 probability that mutual fund X will outperform the market simply by chance If X is the only mutual fund, calculate the probability that it will beat the market for 10 consecutive years due to chance f) 110 marks Now, recognize that there are over 10,000 mutual funds in the United States What is the probability that, by chance, there is at least 1 (out of 10,000 funds) that outperforms the market for 10 consecutive years Page 4 of 4 O LSE 2015 FM429

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PLEASE SEE ATTACHMENT BELOW AND PLEASE ANSWER E and F COMPLETELY   Thanks noise ra er risk can become an important deterrent to arbitrage activity  e) 15 marks) An important test of the efficient market hypothesis is whether some investors can persistently outperform the market  Suppose that in any given year, there is a 50  probability that mutual fund X will outperform the market simply by chance  If X is the only mutual fund, calculate the probability that it will beat the market for 10 consecutive years due to chance  f) 110 marks  Now, recognize that there are over 10,000 mutual funds in the United States  What is the probability that, by chance, there is at least 1 (out of 10,000 funds) that outperforms the market for 10 consecutive years  Page 4 of 4 O LSE 2015 FM429

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Question: PLEASE SEE ATTACHMENT BELOW AND PLEASE ANSWER E and F COMPLETELY . Thanks noise ra er risk can become an important deterrent to arbitrage activity.

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