The Random Walk Theory of Stock Prices Indicates That

question 345

Multiple Choice

The random walk theory of stock prices indicates that

• A) if they are willing to do a little research, even beginning investors will be able to pick the stocks that will increase most in price in the future.
• B) managed mutual funds will persistently earn a higher rate of return than indexed funds.
• C) current stock prices already reflect information about factors influencing future stock prices that can be forecast with any degree of accuracy.
• D) stock market investors can expect to earn a steady real rate of return of about 7 percent annually.

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Definitions:

Prime Costs

The combination of direct materials and direct labor costs.

Direct Labor

The cost of wages for employees who are directly involved in the production of goods or services.

Direct Materials

The raw materials that are directly used in the manufacturing of a product, easily traceable to the finished product.

Equivalent Units Of Production

The number of production units that could have been completed within a given accounting period, given the resources consumed.