Portfolio weights will shift away from securities that have increased in relative value and toward securities that have fallen in relative value whenever the portfolio is rebalanced.

If firms can easily detect cheaters, they can retaliate and this helps maintain collusive agreements. When firms bid for contracts and those bids are closed, cheaters cannot be easily detected because the winning bid is not publicly announced. When there are more firms in the industry, the costs of forming a cartel and reaching an agreement are much higher making it less likely that the firms will collude.

Using Texas Instruments BA II PLUS For m = 4
2 nd ICONV: NOM = previous value
2 nd CLRWORK: NOM = 0.00
7 ENTER: NOM = 7.00 DownArrow: EFF = 0.00 DownArrow: C/Y = previous value (**)
4 ENTER: C/Y = 4.00 UpArrow: EFF = 0.00 CPT: EFF = 7.19 So (I) is correct
Note: For n = 12, replace 4 by 12 in line (**)
Using HP 12C For m = 12
f CLEAR REG: 0.00000000
f CLEAR FIN: 0.00000000
7 ENTER: 7.00000000 (*) 12 n divided by i: 0.58333333 100 CHS
ENTER PV: - 100.00000000 FV: - 107.2290081 Divided by 12: 7.22900810 So (II) is not correct
Note: For quarterly compounding, replace 12 by 4 in line (*)
For m = 8 i.e. continuous compounding 1 ENTER: 1.00000000 7%: 0.07000000 g ex: 1.07250818 *%: 7.25081810 so III is correct.

5
FV = ($10,000)(1.09) = $15,386.24
A
60
FV = ($10,000)(1.0075) = $15,656.81
B
FV -FV = $15,656.81 - $15,386.24 = $270.57
B A
By choosing Bank B, you will be $270.57 better off at the end of 5 years.

Companies should focus on reducing their cost structure and building brand loyalty.