Answer Happy

4. (4) In each of the following statements, identify whether or not each statement is true or false and write a brief explanation (one-two line at most) to support your argument. All credits will be given to the explanations. (a) (0.5] Political instability in an economy is considered a non-systematic risk that is reflected in the total volatility of financial assets. (b) (0.5] The assumption that borrowing equals to lending in CAPM implies that financial markets are efficient. (c) (0.5) An annuity due is just an ordinary annuity for n - 1 years. (d) (0.5) If the beta of an asset is zero, then its sigma, as a measure or risk, ought to be zero since the asset has no risk. (e) (0.5) If the market interest is expected to increase above the coupon rate, then the bond is expected to be traded at a premium. 3