What Is the Result of the Widespread Usage of the Internet

question 52

Multiple Choice

What is the result of the widespread usage of the Internet with regards to efficient markets?

• A)It makes information cheaper and more accessible thus making markets more efficient.
• B)It is subject to new regulation thus marking markets less efficient.
• C)It increases the volatility of security prices thus making markets less efficient.
• D)It increases competition among brokers thus making markets more efficient.

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Definitions:

Characteristic Line

In finance, a line that describes the relationship between the returns on a stock and the returns on the market, used in the Capital Asset Pricing Model (CAPM).

Stable Equilibrium

A state in which a system, once disturbed, returns to its original condition because the equilibrium is stable.

Expected and Required Returns

The returns that investors anticipate or demand from an investment considering its risk, often guiding investment decisions.

SML

Stands for Security Market Line; it represents the relationship between the expected return of an investment and its risk in the capital asset pricing model (CAPM).