The Strong Form of the Efficient Market Hypothesis Contends That

question 82

Multiple Choice

The strong form of the efficient market hypothesis contends that

• A)a select few institutional investors can earn abnormal profits.
• B)abnormal profits are randomly distributed.
• C)no one can consistently earn a profit.
• D)no one can consistently earn abnormal profits.

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Definitions:

Present Value Equation

A mathematical formula used to determine the current value of a future amount of money or stream of cash flows given a specific rate of return.

FV

Future Value, the value of an asset or cash at a specified date in the future that is equivalent in value to a specified sum today.

Compound Interest

Interest calculated on the initial principal of a deposit or loan, as well as on the accumulated interest from previous periods.

Interest on Interest

The interest earned on the reinvestment of previous interest payments, commonly associated with compounding interest.