Which of the Below Statements Is TRUE

question 23

Multiple Choice

Which of the below statements is TRUE?

• A) In a passive strategy, investors seek to capitalize on what they perceive to be the mispricing of a security or securities.
• B) In a market that is price efficient, active strategies will not consistently generate a return after ignoring transactions costs and the risks associated with a strategy of frequent trading.
• C) In a market which seems to be price efficient, one investment strategy is simply to buy and hold a broad cross section of securities in the market
• D) Matching in an investment strategy that has the goal of matching the performance of some financial index from the market.

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Definitions:

Operating Assets

Assets used in the day-to-day operations of a business that are essential for generating revenue, excluding investments and non-operational assets.

Minimum Required Return

The smallest return on investment that an investor is willing to accept, considering the risk associated with the investment.

Cost Center

A department or segment within a company where costs can be allocated, but that does not directly contribute to profit, primarily used for budgeting and control purposes.

Investment Center

A business unit or division that is responsible for its own revenues, expenses, assets, and returns, and is evaluated on its profitability and efficiency in using its assets.