Which of the Following Is the Best Statement of the Efficient

question 43

Multiple Choice

Which of the following is the best statement of the efficient markets hypothesis?

• A) Investors with information that a stock had a positive net present value (NPV) will buy it, while investors with information that a stock had a negative net present value (NPV) will sell it.
• B) Investor's decisions are dependent on complete current information of a firm's cash flows and accurate predictions of future cash flows.
• C) Competition between investors works to make the net present value (NPV) of all trading opportunities zero.
• D) A share's price is the aggregate of the information of many investors.

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Definitions:

Constant Slope

A line on a graph that has the same steepness throughout, indicating a uniform rate of change.

Price Elasticity

Price elasticity measures how the quantity demanded or supplied of a good changes in response to a change in its price.

Linear Demand

A type of demand relationship where changes in price lead to direct, proportional changes in quantity demanded.

Price Elastic

An assessment of the influence that price changes have on the consumer's purchasing volume of a good.