The answer to the first question is inefficiency. The reason is because if the markets are efficient (i.e. prices are nearly always exactly what they should be for a given asset), you will not have bubbles. Bubbles form because public perception of an asset diverges from what the price of the asset should be. When the market becomes inefficient, prices diverge from what they should be.

I believe the answer to the second question is $14. I'm not sure if you've covered beta yet, but it's what we use to measure the relationship of a given stock's movement compared to the movement of its overall market. That is the concept this question leads into. The answer is $14 because if the stock moves .14 points for every 100 point the DJIA rises, 14% of 100 if $14. I would take this answer with a little grain of salt though, because your instructions say the divisor should be .14.

Need help with 2 finance questions immediately please?

Please explain why you got the answer so I understand.

Stock market bubbles and subsequent crashes are examples of market?



a) risk aversion.



b) inefficiency.



c) weak form efficiency.



d) strong form efficiency.

Assuming a divisor of 0.14, a 100-point rise in the DJIA reflects an average increase in the price of each component stock of?



a) $100.



b) $14



c) $0.47



d) none of these.