Four graduates from the Graham School of Management at Saint Xavier University (i.e., Amy, Brad, Chris, and Dale) just founded a firm that examines cash flow patterns of firms operating in Illinois: Chicago Firm Analysts (CFA). Thanks to the high demand for its services, CFA just hired you to help with the analysis of the firms considered in the study. More information on the cash flows patterns of three firms is presented below. State of the Economy Probability Firm 1 Firm 2 Firm 3 Catastrophic 1.50% $1,540 $50 $0 Bad 18.65% $10,410 $12,160 $4,150 Normal 44.55% $15,340 $18,410 $19,150 Good 34.80% $18,110 $26,880 $21,310 Exuberant 0.50% $31,510 $71,590 $26,150 1a. Please compute the expected cash flows pertaining to each of the three firms

Illinois Financial Market Observers (IFMO) is a think-tank that studies financial markets. In fact, IFMO is currently preparing a special document on the functioning of financial markets that will be distributed by commercial banks across the state of Illinois. Because of your sound knowledge in principles of finance, the CEO of IFMO has decided to hire you to help them complete that document with qualified analyses. 2a. Will it ever be possible to reach fully market efficiency in practice? Why?

2b. Do Large firms which internationalize tend to experience high complexities? Please explain.

2c. The Dodd-Frank Act (2010) stands for a major advancement in response to the 2008 Financial Crisis. Will it prevent future financial crises? Please explain.