According to the Efficient Market Theory

question 17

Multiple Choice

According to the efficient market theory,

• A) prices of actively traded stocks can only be under-valued in an efficient market.
• B) prices of actively traded stocks can only be over-valued in an efficient market.
• C) prices of actively traded stocks do not differ from their true values in an efficient market.
• D) prices of actively traded stocks can be under- or over-valued in an efficient market, and bear searching out.

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Definitions:

Fair Market Value

The price at which an asset would change hands between a willing buyer and a willing seller, both having reasonable knowledge of all the relevant facts.

Provincial Bonds

Provincial bonds are debt securities issued by a provincial government in Canada to finance its expenditures and obligations.

Ordinary Annuity

A series of equal payments made at equal intervals of time, such as monthly or annually.

Residential Building Lot

A plot of land designated for the construction of a residential home.