If Capital Markets Are Efficient,then

question 44

Multiple Choice

If capital markets are efficient,then:

• A) There is no reason to believe that prices are too high or too low.
• B) It is not possible to make money by playing the stock market.
• C) Prices will adjust slowly when reacting to new information.
• D) Historical price trends will give you a good idea of where prices are headed in the future.
• E) It is possible to profit regularly from publicly available information.

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Definitions:

Acceptable Investments

Financial assets or securities deemed suitable for purchase based on an investor's risk tolerance, investment strategy, and financial goals.

Payback Periods

The length of time required to recover the original investment cost through the generated returns.

Profitable

A financial state where earnings exceed expenses, resulting in a positive net income.

Discount Rate

The discount rate applied in DCF analysis to calculate the current value of future cash flows.