The Strong Form of the Efficient Markets Hypothesis Contends That

question 59

Multiple Choice

The strong form of the efficient markets hypothesis contends that

• A) no one can consistently earn a profit.
• B) abnormal profits are randomly distributed.
• C) no one can consistently earn abnormal profits.
• D) a select few institutional investors can earn abnormal profits.

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Definitions:

Actual Interest Rate

The real rate of interest earned or paid on an investment, loan, or other financial product, taking into account the effects of compounding.

Non-Interest-Bearing Note

A financial instrument or promissory note that does not accrue interest over time, meaning the borrower repays only the principal amount.

Discount Rate

The interest rate charged to commercial banks and other financial institutions for loans received from a country's central bank.

Actual Interest Rate

The actual rate of interest earned or paid on an investment or loan, considering compounding and other factors, as opposed to the nominal rate.