If the Securities Market Is Efficient,an Investor Need Only Throw

question 53

Multiple Choice

If the securities market is efficient,an investor need only throw darts at the stock pages to pick securities and be just as well off.

• A) This is true because there are no differences in risk and return.
• B) This is true because in an efficient stock market prices do not fluctuate.
• C) This is false because professional portfolio managers prefer to generate commissions by active trading.
• D) This is false because investors may not hold a desirable risk-return combination in their portfolio.
• E) This is false because the markets are controlled by the institutional investors.

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Definitions:

Transfer Profit

Income generated from the internal sale or transfer of goods or services within different segments of the same company.

Intra-Entity Gross Profit

The profit realized from transactions that occur within different parts of the same company, often eliminated during consolidation to prevent overstated financial performance.

Consolidation Worksheet

A tool used in preparing consolidated financial statements, helping in the elimination of intercompany transactions and balances.

Intra-Entity Transfer

A transaction or movement of assets, liabilities, or related items within the same organization, rather than with external entities.