Please wirte the difinition of each answer and use some examples, pictures and math to explain each...

Question

Please wirte the difinition of each answer and use some examples, pictures and math to explain each questions:
1.List and discuss the three lessons of finance. What are the
implications of these lessons for (a) individuals and/or (b) managers of the
firms?
2.Discuss the concept of semi-strong form efficiency
3.“Risk and return are unrelated.”
Discuss
4.Using numerical examples define the NPV rule. What are the
advantages and disadvantages of this method? (Your answer should include a
reference to the objective of the firm and a discussion of independent versus
mutually exclusive projects).
5.Compare and contrast futures and options. Your answer should
include a definition of each.
6.What are the benefits of diversification to an individual? What
is the key factor determining the extent of these benefits?
7.Discuss the relative merits of the alternative methods of
calculating the cost of capital for a division of a company.

David · Accepted Answer

Please wirte the difinition of each answer and use some examples, pictures and math to explain 
each questions: 1. List and discuss the three lessons of finance. What are the implications of 
these lessons for (a) individuals and/or (b) managers of the firms? 2. Discuss the concept of 
semi-strong form efficiency 3. “Risk and return are unrelated.” Discuss 4. Using numerical 
examples define the NPV rule. What are the advantages and disadvantages of this method? 
(Your answer should include a reference to the objective of the firm and a discussion of 
independent versus mutually exclusive projects). 5. Compare and contrast futures and options. 
Your answer should include a definition of each. 6. What are the benefits of diversification to an 
individual? What is the key factor determining the extent of these benefits? 7. Discuss the 
relative merits of the alternative methods of calculating the cost of capital for a division of a 
company. 
Solution:- 
1) Lessons of finance that we learned are as follows:- 
For Individual and managers of the firms:- 
 Taking huge debts without planning the repayment sources will lead to the pilling up 
balance of loans and will lead to bankruptcy. Thus credit management is very 
important in order to avoid debt trap. 
 Always forecast the cash inflows and outflows on scientific basis. Forecasting errors 
should be avoided as incorrect cash flow predictions will lead to wrong decisions. 
 Always plan to buy long term assets from long term loans and short term assets from 
short term loans. If you buy long term assets from short term loan then in such event 
you have to arrange loan again and again in order to repay the earlier loan whereas if 
you procure short term asset with long term loan then you have to bear the 
prepayment charges and sometimes you might also have to pay the interest on the 
amount withdrawn from the bank but is lying unutilized with us. 
2) Semi-strong form of efficiency:- 
Efficient-market hypothesis is represents the efficiency of market to react to a particular 
information about the company, it is further categorized into three form of market first is weak 
form of market, second is Semi-strong form of efficiency and third is strong form of efficiency.

Please wirte the difinition of each answer and use some examples, pictures and math to explain each questions: 1.List and discuss the three lessons of finance. What are the implications of these...

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