If the Efficient Market Hypothesis Holds, Investors Should Expect

question 11

Multiple Choice

If the efficient market hypothesis holds, investors should expect:

• A) to earn only a supernormal return.
• B) to receive a high price for their securities.
• C) to always be able to pick stocks that will outperform the market averages.
• D) to earn only a normal return; and to receive a fair price for their securities.
• E) to receive a fair price for their securities; and to always be able to pick stocks that will outperform the market averages.

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Definitions:

Gamete

A mature haploid male or female germ cell that is able to unite with another of the opposite sex in sexual reproduction to form a zygote.

Diploid

An organism or cell having two sets of chromosomes or twice the haploid number, typifying most body cells except for gametes.

Chromosomes

Thread-like structures located inside the nucleus of animal and plant cells, made of protein and a single molecule of DNA, responsible for carrying genetic information.

Sister Chromatids

Replicated forms of a chromosome joined together by a common centromere and eventually separated during cell division.