The Efficient Markets Hypothesis Suggests That If an Unexploited Profit

question 5

Multiple Choice

The efficient markets hypothesis suggests that if an unexploited profit opportunity arises in an efficient market,

• A) it will tend to go unnoticed for some time.
• B) it will be quickly eliminated.
• C) financial analysts are your best source of this information.
• D) prices will reflect the unexploited profit opportunity.

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Definitions:

Draft

An instrument validating an order by a drawer to a drawee to pay a payee.

Imposter Rule

A legal principle concerning negotiable instruments which states that if an impostor induces a payor to issue a check made payable to the impostor, the drawer is liable for the amount to a holder in due course.

Forgery Rule

A legal principle that addresses the falsification of documents and the consequences associated with such acts.

Endorser

An individual or entity that signs a document (usually on its reverse side) indicating support, approval, or transfer of rights.