Which of the Following Is False

question 20

Multiple Choice

Which of the following is false?

• A)If information about a financial instrument is expected, then an announcement of the information will have little or no effect on the instrument's price.
• B)An implication of the efficient markets hypothesis is that it is impossible to beat the market (earn an above average return).
• C)When interest rates change, there is no effect on default risk and therefore risk premiums are unaffected.
• D)Powerful mood swings of optimism or pessimism can sweep markets and become part of the changing information that affects prices.

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Definitions:

Cash Break-Even

The point at which a business's cash inflows exactly match its cash outflows, exclusive of financing, indicating no net cash gain or loss.

Straight-Line Depreciation

A tactic for apportioning the cost of a physical asset over its effective lifespan in identical yearly expenditures.

Fixed Costs

Expenses that do not change with the level of goods or services produced over a short period.

Operating Cash Flow

A measure of the amount of cash generated by a company's normal business operations, indicating whether a company can generate sufficient positive cash flow to maintain and grow its operations.