Which of the Following Is the Best Statement of the Efficient

question 35

Multiple Choice

Which of the following is the best statement of the efficient markets hypothesis?

• A)Investors with information that a stock had a positive net present value (NPV)will buy it,while investors with information that a stock had a negative net present value (NPV)will sell it.
• B)Investor's decisions are dependent on complete current information of a firm's cash flows and accurate predictions of future cash flows.
• C)Competition between investors works to make the net present value (NPV)of all trading opportunities zero.
• D)A share's price is the aggregate of the information of many investors.
• E)Investors should only buy stocks with a positive net present value (NPV).

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Definitions:

Collection Time

The average period that a company takes to collect payments from its customers after a sale has been made, impacting cash flow and liquidity.

Processing Delay

The time lag between the initiation and completion of a process, often seen in transaction processing or manufacturing operations.

Availability Delay

The lag between the deposit of a check and the moment the funds become available in the account.

Securities Trade

The buying and selling of financial instruments such as stocks, bonds, and mutual funds.