If the Financial Markets Were Regulated Such That the Markets

question 1

Multiple Choice

If the financial markets were regulated such that the markets maintained strong form efficiency, then:

• A)insider trading laws would be unnecessary.
• B)all investors would earn equivalent rates of return.
• C)risk premiums would vanish.
• D)all investors would become arbitrage traders.
• E)securities would tend to be continually underpriced.

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Definitions:

Unlevered Cost

The cost of financing a project or investment without any debt.

Debt/Equity Ratio

This ratio signals the proportionate financing of company assets by means of shareholders' equity and debt.

Borrow

The act of receiving money, goods, or services from a lender or institution under an agreement to return or repay it in the future.

Stock Price

The cost of purchasing a single share of a particular stock on the stock market.