Which of the Following Is NOT One of Modigliani and Miller's

question 29

Multiple Choice

Which of the following is NOT one of Modigliani and Miller's conditions for a perfect capital market?

• A) Investors and firms can trade the same set of securities at competitive market prices equal to the present value (PV) of their future cash flows.
• B) There are no taxes, transaction costs, or issuance costs associated with security trading.
• C) A firm's financing decisions do not change the cash flows generated by its investments, nor do they reveal new information about them.
• D) All investors hold the efficient portfolio of assets.

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Definitions:

Candy Bars

Pre-packaged bars made primarily of chocolate and often combined with other ingredients like nuts, caramel, or nougat.

Marginal Utility

The change in satisfaction or utility an individual gains from consuming one additional unit of a good or service.

Consumer Equilibrium

In marginal utility theory, the combination of goods purchased that maximizes total utility by applying the utility-maximizing rule.

Prices

The amount of money required to purchase a good or service, often determined by the forces of supply and demand in the market.