In an Efficient Market, It Is Believed by Some Individuals

question 8

Multiple Choice

In an efficient market, it is believed by some individuals that the actions of traders who constantly buy and sell on any perceived market mispricings will in effect cause market prices to correctly
Reflect asset values. A person who believes that the actions of these traders will not result in
Correctly valued prices is most apt to believe in which one of the following?

• A) Gambler's fallacy.
• B) Limits to arbitrage.
• C) Availability bias.
• D) False consensus.
• E) Clustering illusion.

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Definitions:

Inflation Rate

The speed at which the overall price level for products and services increases, diminishing the buying power.

Hourly Rate

The amount of money paid or charged for one hour of labor or service.

Compounded Semi-annually

The process of calculating interest on the principal balance and previously earned interest every six months.

GIC

A finance option available in Canada, the Guaranteed Investment Certificate provides investors with a secured rate of return over an established time period.