In an Efficient Market, the Market Price of an Asset

question 2

Multiple Choice

In an efficient market, the market price of an asset

• A)reflects the returns the asset has been earning previously.
• B)is fixed by federal regulators after a thorough consideration of all available information.
• C)equals the present value of expected future returns.
• D)is largely determined on the demand side, because the supply of assets in such markets is generally fixed.

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Definitions:

Fixed Overhead Volume Variance

The difference between the budgeted and actual fixed overhead costs attributable to a change in the volume of production or procurement.

Fixed Overhead Budget Variance

The difference between the actual fixed overhead costs incurred and the budgeted or standard fixed overhead costs.

Direct Labor-hours

The complete total of working hours by individuals directly involved in the fabrication process.

Fixed Overhead

Costs that do not vary with the level of production or sales, including rent, salaries, and insurance, which are incurred regardless of the business activity level.