Derive the fund separation theorem, Corporate Finance

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Question 1:

(a) What are the competing theories which have been put forward to explain the term structure of interest rates? Which theories do the evidence tend to support?

(b) Derive the Two Fund Separation Theorem

(c) Give a brief account of the recent financial crisis and its impact on investors and regulators.

Question 2:

(a) What is market efficiency and why is it important?

(b) What is the evidence in relation to weak form market efficiency?

(c) What is the event study methodology? Explain one test of market efficiency using this methodology.


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