An Efficient Capital Market Is Best Defined as a Market

question 65

Multiple Choice

An efficient capital market is best defined as a market in which security prices reflect which one of the following?

• A)Current inflation
• B)A risk premium
• C)Available information
• D)The historical arithmetic rate of return
• E)The historical geometric rate of return

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Definitions:

Profit Margin

A financial performance ratio, calculated by dividing net income by sales revenue, indicating how much profit a company keeps from its sales.

ROE

Return on Equity (ROE) is a measure of financial performance calculated by dividing net income by shareholders' equity, indicating how effectively a company uses investments to generate earnings growth.

P/E Ratio

Price to Earnings Ratio, a valuation metric comparing a company's market share price to its per-share earnings.

Stock Price

The cost of purchasing a share of a company's stock, representing the market's value of a share of the company's equity.