An Implication of the Efficient Markets Hypothesis Is That

question 46

Multiple Choice

An implication of the efficient markets hypothesis is that

• A)only sophisticated investors will be able to earn above-normal profits from financial investments.
• B)above-normal profits are available only to major traders.
• C)above-normal profits will be eliminated in the trading process.
• D)unless he or she acts recklessly, the average investor should be able to make above-normal profits.

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Definitions:

Historical Cost Principle

An accounting principle that states assets should be recorded and reported at their original purchase cost and not adjusted for changes in market value.

Appraisal Value

The assessed value of an asset, typically real estate or a business, determined by a professional appraiser based on the property's condition, market trend, and comparable sales.

Market Price

The present rate at which a service or asset is available for purchase or sale in the market.

Fair Value

A measurement of the price at which an asset would be bought or sold in a current market transaction.