A weak-form inefficient market can best be described as a market in which: A

 1 The correct answer is

C) share prices follow predictable trends

Weak form of efficient markets states that past prices pattern can not be used to generate excess return so if the market is weak form inefficient then the historical prices should follow a pattern and can be used to generate excess return.

Option A is when there is absence of strong form of efficiency. Option B would be true when there is weak form of efficiency not inefficiency. Option D is true when there is semi-strong form of efficiency.

The correct answer is

B) a securitization agreement

A securitization agreement is something which is an off- balance sheet item. Term deposit, housing loan and a negotiable certificate of deposit are liabilities as these are funds from the investors and shown on the balance sheet.

2 Question 1: An investor quickly selling a share after an year of poor performance is an example of :

Answer:A. Mental accounting. No, because mental accounting is a behavioral concept where a person places different values of same amount of money, based on some subjective criteria.

B. Representativeness. No, as it is a method of using past events of similar nature to take a decision.

1. C. Disposition Effect. No, because disposition effect is the tendency of investors to sell investments that have increased in value while keeping the investments that have dropped in value.

2. Question 2 : In the last year share A has moved from $10 to $20, share B from $30 to $20 and share C from $15 to $20. An investor exhibiting the disposition effect who is going to sell two of the shares is more likely to retain.

   Answer : Disposition effect is the tendency of an investor to sell the investments that have increased in value, while keeping the investments that have dropped in value.

3. A, C . No, as share A has moved from $10 to $20 (increasing 100%) and share C has moved from $15 to $20 (increasing 33.33%)
4. B, B. Yes, as share B has moved from $30 to $20 (decreasing 33.33%). Following the disposition effect the investor is likely to retain share B as its price has dropped by $10, while he shall choose to sell shares A and C as their prices have increased by $10 and $5 respectively.
5. C, A. No, as value of share C has increased by $5, moving from $15 to $20
6. D. No, as no information given about share D.
7.  
8. D. Conservatism. Yes, as this is a method of investing in low risk securities. A conservative investor priortizes to protect the capital over market returns. As the company had an year of poor performance, so the market reaction would likely go against it and hence stock price could fall, decreasing the current value of the investment. By selling the investment at this point, an investor could save his investments from likely decreasing in value.