If Security Markets Are Fully Efficient, the Best Common Stock

question 47

Multiple Choice

If security markets are fully efficient, the best common stock strategy is:

• A) a rotation strategy.
• B) a buy low, sell high strategy.
• C) an active strategy.
• D) a passive strategy.

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Definitions:

Commercial Paper

An unsecured, short-term debt instrument issued by corporations, typically used for financing payroll, accounts payable, and other short-term liabilities.

Maturity

Maturity refers to the date on which the principal or final payment is due on a debt instrument, after which the debt is considered repaid.

Futures Position

A contractual obligation to buy or sell a particular commodity or financial instrument at a predetermined price at a specified time in the future.

Underlying Commodity

The basic physical asset upon which futures contracts and derivatives are based.