Which of the Following Is NOT One of Modigliani and Miller's

question 46

Multiple Choice

Which of the following is NOT one of Modigliani and Miller's set of conditions referred to as perfect capital markets?

• A) All investors hold the efficient portfolio of assets.
• B) There are no taxes, transaction costs, or issuance costs associated with security trading.
• C) A firm's financing decisions neither change the cash flows generated by its investments, nor do they reveal new information about them.
• D) Investors and firms can trade the same set of securities at competitive market prices equal to the present value (PV) of their future cash flows.

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Definitions:

Cognitive Equilibrium

A state of mental balance where individuals' inner schemas effectively handle new information through assimilation and accommodation, as proposed by Piaget.

Cognitive Development

The process by which an individual perceives, thinks, and gains understanding of their world through the integration and coordination of sensory experiences with previous knowledge and learning.

Reinterpretation

involves the process of understanding or presenting something in a new or different way, often leading to a shift in perception or meaning.

Personal Choice

The freedom to make decisions independently, reflecting personal preferences or values.