Exam Paper Essay Example | Topics and Well Written Essays - 1250 words

Exam Paper - Essay Example semi-strong form of efficiency is a class of EMH which claims that all public information is calculated into a stock’s current price hence there is no way either fundamental or technical analysis is applicable to achieve superior gains. It claims only non-publicly available information can be used by investors to earn abnormal returns on their investments as all the other remaining information is accounted for in the prices of the stocks and no fundamental or technical analysis will result into above normal returns. Strong form efficiency is the strongest as the name suggests as it states all the information in a stock market irrespective of whether public or private. All such information is accounted for in the stock price and not even insider information could give an investor advantage hence profits exceeding normal returns cannot be made regardless of the amount of research or information available to the investors. If a company trades its shares in a stock market with a s emi-strong efficient market, the investors are likely to use the privately available information to make abnormal returns on their investment. Answer 2 The increase of the interest rates by the central bank results into loans from commercial banks being expensive as they also raise their interest rates to cover for the rise by the central bank. ... Therefore, one thing that has to happen is that the sales by Tintin will have to drastically reduce by a wide margin as the purchases of such goods by consumers will go down due to their escalated prices and a lack in their necessity. In addition, the long run is likely to see the bank adjusting their interest rates to accommodate the changes which results into an increase in the operation costs of Tintin due to increased rates of interest. The increased costs have an extended impact which translates into the reduced earnings of the firm, the economic situation at such times is volatile and the economic component which experiences this is the business people since they find it quite hard to balance between demand and supply. Answer 3 3. (a) There are a number of incomes which are not taxed or are not subjected to income tax. They include:- incomes realized by taxpayers to the extent of debts forgiven, payments from state sickness or disability funds, compensation received under the w orkers compensation act, interest earned from tax exempt municipal bonds, income from the sale of one’s primary residence whether it is sold on profit or at a loss. Others include:- incomes in form of life insurance money and non taxable gifts as a gift is exactly what it sounds like, fringe benefits from employers and child support funds as well as foster care payments. All these are not subject to income tax according to the law. 3. (b) Higher rate tax payers are subjected to a different tax rate brackets as compared to the lower rate tax payers. Therefore as the lower rate tax payers will be paying tax at 20%, the higher rate tax payers will pay the taxes at 40%. Therefore an investor who received a 90