If the Random Walk Theory Is Correct, a Prudent Investor

question 50

Multiple Choice

If the random walk theory is correct, a prudent investor might choose her stock portfolio by

• A)throwing darts at the newspaper's financial page.
• B)spending money to consult a stock forecaster.
• C)spending time analyzing past stock performance.
• D)not investing in stocks at all, since price behavior is completely erratic.

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Definitions:

Future Interest

An interest in real or personal property that will begin at a future date through a legal arrangement, such as a will or trust.

Earnest Money

A deposit made by a buyer to demonstrate commitment to a purchase agreement, often used in real estate transactions.

Serious Offer

An offer made in earnest, usually in a contractual context, implying a genuine intent to enter into an agreement.

Contractual

Pertaining to or involving agreements between two or more parties that are binding and enforceable by law.