Which of the Following Is One of the Characteristics of Perfect

question 61

Multiple Choice

Which of the following is one of the characteristics of perfect capital markets?

• A)All investors hold the efficient portfolio of assets.
• B)There are no taxes,but there may be transaction costs associated with security trading.
• C)A firm's financing decisions may change the cash flows generated by its investments.
• D)Investors and firms can trade the same set of securities at competitive market prices equal to the present value (PV)of their future cash flows.
• E)No market participants engage in illegal behaviour.

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Definitions:

Initial Cash Balance

The amount of cash a company has at the beginning of a specific accounting period.

Weekly Disbursements

The process of distributing funds or payments on a weekly basis.

Trading Costs

Expenses associated with buying and selling securities, including brokerage fees, commissions, and taxes.

Market Rate of Return

The overall or average return on investment that investors expect from participating in the financial markets.