If a Market Is Efficient, Then

question 30

Multiple Choice

If a market is efficient, then

• A)it may be perfect or imperfect.
• B)all investments will offer the same return.
• C)there is no reason to invest in it since you can't expect to earn any excess returns.
• D)it must also be perfect.

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Definitions:

Fair Market Value

The price at which an asset would trade in a competitive auction setting.

Sam, Capital

An account representing the owner's (Sam's) equity or ownership interest in a business.

Profit and Loss Ratio

An indicator that measures the ratio of profits earned to losses incurred over a particular period, often used to assess a company's financial health.

Income Summary

A temporary account in the ledger that summarizes revenue and expenses and transfers the balance (net income or net loss) to Capital. This account does not have a normal balance, i.e. it could have a debit or a credit balance.