Security Prices Are Said to Follow a "Random Walk," Which

question 85

Multiple Choice

Security prices are said to follow a "random walk," which means that:

• A)stock selection for portfolio composition is unimportant.
• B)it is impossible to know whether stocks offer higher returns than bonds.
• C)investment analysts are unnecessary.
• D)successive price changes are unpredictable.

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Definitions:

Variable Expenses

Costs that change in proportion to the activity or business volume.

Fixed Expenses

Costs that do not change in total despite fluctuations in business activity levels or volume, such as rent or salaries.

Percentage of Sales Approach

A method for forecasting financial needs based on a fixed percentage of projected sales, often used in budgeting and financial planning.

Profit Margin Percentage

A profitability ratio calculated by dividing net income by revenue, expressing the result as a percentage.