1.

What is the difference between Investment-Saving schedule and WACC-Investment

opportunities schedule?

The WACC-investment opportunity schedule is the representation of the returns on

investment. Graphically, it is downward sloping which means that the company will invest in the

highest yielding investments first and then as the capital is available, it will invest in the lower

yielding investment. Investment saving schedule is the normal procedure how you invest and how

you get back the money through the basic I = P* T*R /100 way while WACC is though sometimes

complicated. The investment saving schedule helps with decision making for a firm just as the

WACC investment opportunity schedule does. It helps the firm to decide between saving and

investing further.

2. Do you think that the financial markets are efficient?

The efficient market hypothesis describes that a security price fully reflects all available

info in the efficient market. I believe that the market is efficient in this regard. There is

continuously a monitoring of the securities market, and the prices are constantly changing in the

market. The prices depend on the firms financial status. It can be dependent on some external

factors like the political scenario of a country, natural disasters, war, etc. too. Based on all of the

information, the prices of the securities and stocks change on a daily basis. I feel that the prices

reflect all the info available in a market, but there are some unpredictable events which keep the

market inefficient too. So overall I believe that the market is semi-efficient.

3. Do you know any evidence about market inefficiencies?

Inefficient market resists the efficient market hypothesis. It emphasizes that the market

price of common stock and similar securities are not always priced accurately and tend to deviate

from the fair discounted value of their future cash flows. Some securities will be underpriced, and
others will be overpriced in an inefficient market, which means some investors can make excess

returns whereas others can lose more than warranted by their level of risk exposure. It is a risk and

volatility of a market that is reflected in the financial crisis of the recent times. It is one of the

evidence of the market inefficiency.

4. Can we predict the prices of an asset or they follow random walks?

I believe that one can predict the price of an asset mathematically. But, I also believe that

this expectation isn't accurate. It relies upon lots of variables that are random, and the stock price

depend on all of this random information as I discussed in the previous answer. As we studied in

the efficient market hypothesis, prices of the stocks are moving randomly so, it is not possible to

predict them. Therefore, I believe that the stock prices can't be anticipated accurately.
References:

Cost of Capital. (n.d.). Retrieved from http://www.costmatters.com/180-perspective/cost-of-

capital/

Folbre, N. (2013). The Inefficient Market Hypothesis. Retrieved from

https://economix.blogs.nytimes.com/2013/10/21/the-inefficient-market-hypothesis/

What is the Random Walk Theory? Definition and Meaning. (2017). Retrieved from

http://marketbusinessnews.com/financial-glossary/random-walk-theory-definition-

meaning/