1. Analysis of 60 monthly rates of return on United Futon common stock indicates a beta of 1.45 and an alpha of - .2% per month. A month later, the market is up by 5%, and United Futon is up by 6%....

1. Analysis of 60 monthly rates of return on United Futon common stock indicates a beta of 1.45 and an alpha of - .2% per month. A month later, the market is up by 5%, and United Futon is up by 6%. What is Futon’s abnormal rate of return?

2. True or false?

a. Analysis by security analysts and investors helps keep markets efficient.

b. Psychologists have found that, once people have suffered a loss, they are more relaxed about the possibility of incurring further losses.

c. Psychologists have observed that people tend to put too much weight on recent events when forecasting.

d. If the efficient-market hypothesis is correct, managers will not be able to increase stock prices by creative accounting that boosts reported earnings.