If in an Efficient Market All Prices Are Correct and Reflect

question 76

Multiple Choice

If in an efficient market all prices are correct and reflect market fundamentals,which of the following is a false statement?

• A) A stock that has done poorly in the past is more likely to do well in the future.
• B) One investment is as good as any other because the securities' prices are correct.
• C) A security's price reflects all available information about the intrinsic value of the security.
• D) Security prices can be used by managers to assess their cost of capital accurately.

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Definitions:

Solvent

A substance capable of dissolving other substances (solutes) to form a solution, often used in chemical processes and industries.

Acetylene

The simplest alkyne, a hydrocarbon with carbon-carbon triple bonds, used as a fuel and a building block in chemical synthesis.

Ethene

A colorless flammable gas (C2H4), the simplest alkene, acting as a fundamental building block in the petrochemical industry.

pKa

A quantitative measure of the strength of an acid in solution, reflecting its dissociation into a proton and an anion.