If Stock Prices Follow a Random Walk,it Means

question 50

Multiple Choice

If stock prices follow a random walk,it means

• A)long periods of declining prices are followed by long periods of rising prices.
• B)the greater the number of consecutive days of price declines,the greater the probability prices will increase the following day.
• C)stock prices are unrelated to random events that shock the economy.
• D)stock prices are just as likely to rise as to fall at any given time.

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Definitions:

Periodic Interest

Interest that is paid or calculated at regular intervals over the life of a loan or investment.

Stated Interest

The interest rate declared on a bond or loan that represents the actual annual cost of borrowing to the borrower.

Compound Interest

Interest earned on both the initial principal and the interest reinvested from prior periods.

Annuity Stream

A series of equal cash flows distributed at regular intervals over a specified period.