Individuals That Continually Monitor the Financial Markets Seeking Mispriced Securities

question 22

Multiple Choice

Individuals that continually monitor the financial markets seeking mispriced securities:

• A) tend to make substantial profits on a daily basis.
• B) tend to make the markets more efficient.
• C) are never able to find a security that is temporarily mispriced.
• D) are always quite successful using only well-known public information as their basis of evaluation.

---

Definitions:

Bond Ratings

A grade given to bonds that indicates their credit quality, with higher ratings suggesting a lower risk of default.

DBRS

A credit rating agency that evaluates the creditworthiness of entities and their issued debt.

Default Risk

The risk associated with the possibility of a borrower failing to make required payments on their debt obligations.

Interest Rate Risk Premium

The compensation investors demand for bearing interest rate risk.