If Markets Are Efficient, It Is ________ When Trading on the Basis

question 59

Multiple Choice

If markets are efficient, it is ________ when trading on the basis of information.

• A) easy to ignore a random walk
• B) possible to make sustained profits
• C) impossible to make economic profits
• D) easy to generate economic rent
• E) difficult to understand fundamentals

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Definitions:

Retained Earnings

The portion of a company's profits that is kept or retained for re-investment in the business or to pay debt, rather than being paid out as dividends to shareholders.

Treasury Stock

Shares that were issued and later reacquired by the issuing company, reducing the amount of outstanding stock on the market.

Issue Price Over Par

Occurs when a security, typically a bond, is sold at a price higher than its face value.

Preferred Stock

A class of shares which typically provides a fixed dividend and has priority over common stock in the distribution of assets during liquidation.