Semistrong Form Market Efficiency States That the Value of a Security

question 42

Multiple Choice

Semistrong form market efficiency states that the value of a security is based on:

• A)all public and private information.
• B)historical information only.
• C)all publicly available information.
• D)all publicly available information plus any data that can be gathered from insider trading.
• E)random information with no clear distinction as to the source of that information.

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Definitions:

Present Value

Today's financial valuation of an anticipated future monetary sum or series of transactions, adjusted for a certain rate of return.

Annual Cash Inflow

The total amount of cash received by a company from its operations, investments, and financing activities over the course of a year.

Required Return

The minimum return that investors expect to receive on an investment, considering its risk.

Net Present Value Method

The Net Present Value Method is a financial analysis tool used to evaluate the profitability of an investment by calculating the present value of expected future cash flows minus the initial investment cost.