If the Securities Market Is Efficient,an Investor Need Only Throw

question 40

Multiple Choice

If the securities market is efficient,an investor need only throw darts at the stock pages to pick securities and be just as well off as they would be with a professionally-developed portfolio.This statement is:

• A)true because there would be no significant difference in risk and return.
• B)true because in an efficient stock market all portfolios earn the market rate of return.
• C)false because professionals guarantee higher returns given the same level of risk.
• D)false because investors may not hold a desirable risk-return combination.
• E)false because the markets are controlled by the institutional investors.

---

Definitions:

Direct Labor Budget

An estimation of the total cost of labor directly involved in the production process for a future period.

Merchandise Purchases Budget

A merchandise purchases budget outlines the planned spending on goods for resale during a certain period, considering expected sales and inventory requirements.

Credit Sales

Sales made on credit, allowing customers to pay at a later date, which are recorded as accounts receivable on the balance sheet.

Cash Receipts

The collection of cash during a period, including cash sales and received payments from customers.