Which of the Following Is a Characteristic of an Efficient

question 78

Multiple Choice

Which of the following is a characteristic of an efficient market?

• A) Small number of individuals
• B) Opportunities exist for investors to profit from publicly available information.
• C) Security prices reflect fair value of the firm.
• D) Immediate response occurs for new public information.

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Definitions:

Risk-Free Rate

The hypothetical return rate on an investment that carries no risk of losing money, commonly illustrated by the interest rate on government securities.

Multifactor Model

A financial model that employs multiple factors in its calculations to explain market phenomena and/or equilibrium asset prices.

Unanticipated Inflation

Inflation that occurs when the actual rate exceeds what was expected, potentially eroding purchasing power and investment returns.