Which of the Following Is Correct

question 38

Multiple Choice

Which of the following is correct?

• A)Reported accounting numbers do not affect the transfer of resources.
• B)Credit rating agencies use accounting information to assess their assets.
• C)Efficient capital markets promote productivity and encourage innovation.
• D)Efficient capital markets promote productivity but do not encourage innovation.

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Definitions:

Risk-free Rate

The theoretical rate of return of an investment with zero risk, often represented by the yield on government bonds.

Market Risk Premium

The extra return over the risk-free rate that investors require to hold a risky market portfolio.

Beta

A measure of a stock's volatility in relation to the overall market; often used as a gauge of an asset's risk.

Security Market Line

A line that represents the relationship between risk and expected return in financial markets.