In an Efficient Market,the Expected Abnormal Return on a Security

question 27

Multiple Choice

In an efficient market,the expected abnormal return on a security is:

• A)equal to zero.
• B)equal to the risk-free rate of return.
• C)equal to the security's required return.
• D)greater than the security's required return.

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Definitions:

Compounded Quarterly

The process where the interest earned is added to the principal sum, and the next interest calculation is based on the principal plus the previously earned interest, recalculated every quarter.

Compounded Semi-Annually

The process of earning interest on both the initial principal and the accumulated interest from previous periods, calculated twice a year.

Insurance Settlement

The payment made by an insurance company to a claimant or policyholder following a valid claim.

Retirement

The act of leaving one's job and ceasing to work, typically upon reaching a certain age or due to personal choice.