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 theimplications of these...

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amount withdrawn from the bank but is lying unutilized with us.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.
Semi-strong form...