An Efficient Capital Market Is One in Which

question 30

Multiple Choice

An efficient capital market is one in which:

• A)brokerage commissions are zero.
• B)taxes are irrelevant.
• C)securities always offer a positive NPV.
• D)all investments earn the market rate of return.
• E)security prices reflect all available information.

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Definitions:

Hourly Wage

Compensation paid to employees based on the number of hours worked, typically expressed as an amount of money per hour.

Parking

The act of stopping and disengaging a vehicle and leaving it unoccupied.

Implicit Costs

Additional costs that do not appear on the financial statements of a company. These costs include items such as the opportunity cost of capital.

Economic Profits

Profits that exceed the opportunity costs of all resources used by the firm, including both explicit and implicit costs.