The Efficient Market Hypothesis States That When Financial Markets Are

question 37

Multiple Choice

The efficient market hypothesis states that when financial markets are in equilibrium

• A)the prices of financial instruments reflect all readily available information.
• B)the economy will eventually reach its steady state, long run, equilibrium.
• C)the future markets will become more efficient than in previous years.
• D)all financial instruments have the same amount of risk.

---

Definitions:

Expenses

Expenses are the costs incurred in the process of generating revenue, including operational costs, salaries, and utility expenses, critical for determining a company's net income.

Revenues

The total income generated by a company from its activities, before any expenses are deducted.

Income Summary

An account in the ledger that is used to transfer the balances of revenue and expense accounts at the end of an accounting period to determine the net income or loss.

Net Income

The total earnings of a company after subtracting all costs and expenses from revenues; also known as net profit.