If Financial Markets Were Not Efficient,it Would Be Easier for Firms

question 40

Multiple Choice

If financial markets were not efficient,it would be easier for firms to:

• A) finance investments in a zero-NPV transaction.
• B) finance investments in a positive NPV transaction.
• C) totally avoid the need for external financing.
• D) finance investments in a negative NPV transaction.

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Definitions:

Government Involvement

The extent to which a government participates in or influences various aspects of society or the economy.

Rational Basis Review

A standard of review used by courts to evaluate the constitutionality of a law or government action, requiring that the law be rationally related to a legitimate governmental interest.

Establishment Clause

A provision of the First Amendment to the U.S. Constitution that prohibits the government from establishing an official religion, endorsing all religions, or favoring one religion over others.

Free Exercise Clause

A provision in the First Amendment of the US Constitution that protects individuals’ rights to practice their religion freely, without government interference.