Security at the prevailing market price

Reference no: EM13741814

Multiple Choice Question:

Question 1: If the capital markets are efficient, then the sale or purchase of any security at the prevailing market price is:

A. Always a positive NPV transaction

B. Generally a zero NPV transaction

C. Is always a negative NPV transaction

D. None of the above

Question 2: The statement that stock prices follow a random walk implies that:

I) Successive price changes are independent of each other.

II) Successive price changes are positively related

III) Successive price changes are negatively related

IV) The autocorrelation coefficient is either +1 or -1

A. I only

B. II and III only

C. IV only

D. III only

Select one:

Question 3: Stock price cycles or patterns self-destruct as soon as investors recognize them through:

A. stock market regulation by the Securities and Exchange Commission (SEC)

B. price fixing by the specialists on New York Stock Exchange

C. trading by the investors

D. none of the above

Select one:

Question 4: Different forms of market efficiency are:

I) Weak form

II) Semi-strong form

III) Strong form

A. I only

B. I and II only

C. I and III only

D. I, II and III

Select one:

Question 5: If the efficient market hypothesis holds, investors should expect:

I) to receive a fair price for their security

II) to earn a normal rate of return on their investments

III) to be able to pick stocks that will outperform the market

A. I only

B. II only

C. III only

D. I and II only

Select one:

Question 6: Which of the following is a statement of weak form efficiency?

I) If markets are efficient in the weak form, then it is impossible to make consistently superior profits by using trading rules based on past returns

II) If the markets are efficient in the weak form, then prices will adjust immediately to public information

III) If the markets are efficient in the weak form, then prices reflect all information

A. I only

B. II only

C. II and III only

D. III only

Select one:

Question 7: If the weak form of market efficiency holds, then:

I) Technical analysis is useless

II) Stock prices reflect information contained in past prices

III) Stock price changes follow a random walk

A. I only

B. I and II only

C. I, II, and III

D. I and III only

Select one:

Question 8: Which of the following is a statement of semi-strong form efficiency?

I) If the markets are efficient in the semi-strong form then prices will adjust immediately to public information

II) If the markets are efficient in the semi-strong form then prices reflect all information

III) If the markets are efficient in the semi-strong form then prices will adjust to newly published information after a long time delay

A. I only

B. II only

C. II and III only

D. III only

Select one:

Question 9: Strong form market efficiency states that the market incorporates all information in the stock price. Strong form efficiency implies that:

I) An investor can only earn risk-free rates of return

II) An investor can always rely on technical analysis

III) An insider or corporate officer cannot outperform the market by trading on the inside information

A. I only

B. II only

C. III only

D. I, II, and III

Select one:

Question 10: If the markets are efficient, which of the following investors should have above normal return on assets over time?

A. Those who choose their stocks by throwing darts at a list of stocks found in the financial pages of a newspaper.

B. Analysts who spend considerable time evaluating the best stocks to buy.

C. Mutual fund managers who manage other people's money for a living.

D. None of the above

Select one:

Question 11: One important implication of the efficient markets hypothesis is that:

A. investors should hold a diversified portfolio and avoid active trading.

B. investors can benefit by engaging in day trading.

C. investors should trade actively help to ensure the highest overall gain in their portfolios.

D. all of the above.

Select one:

Question 12: Abnormal stock return is calculated as:

A. actual stock return less expected stock return

B. return on stock less return on market

C. return on stock for the current period less return on stock for the previous period

D. none of the above

Select one:

Question 13: Studies on behavioral finance have been developed using:

A. market evidence

B. economic evidence

C. psychological evidence

D. none of the above

Select one:

Question 14: Investors are particularly averse to the possibility of even a very small loss and need a high return to compensate for it. Such a concept is related to what theory?

A. Market efficiency theory

B. Random walk theory

C. Convergence trading

D. Prospect theory

Select one:

Question 15: For a corporation, financing decisions are harder to reverse than investment decisions.

Select one:

True

False

Reference no: EM13741814

Questions Cloud

Federal regulations and the economy : The U.S. financial system has many complexities, and it is impacted by several environmental factors, including federal regulations and the economy.

Trade will raise mexican workers marginal product : Suppose the U.S. and Mexico both produce 2 goods, tablets and cereal, using 2 inputs, capital (K) and labor (L). The production of tablets is capital-intensive, and that of cereal is labor-intensive.

Increased sunlight will cause increased plant growth : A researcher hypothesizes that increased sunlight will cause increased plant growth. She takes 2 plants and places them in full sun, 2 are placed in a moderately sunny environment and 2 are placed in the dark. What is wrong with this experiment?

Find the revenue-total cost and profit function : Suppose you run a manufacturing business that is involved in manufacturing and selling a single product. The fixed cost to run the business is $15,000 and the constant marginal cost is $7.50 per unit. The sale price of your product is $15 per unit. F..

Security at the prevailing market price : Question 1: If the capital markets are efficient, then the sale or purchase of any security at the prevailing market price is:

Write a paper that analyzes role of religion in amerindians : Write a paper that analyzes the role of religion, race, or gender in shaping the patterns of interaction among Amerindians, Africans, and Europeans in a specific area of the Atlantic World during the period of encounters.

Discuss fertilization pregnancy & childbirth : Discuss TOPIC-FERTILIZATION, PREGNANCY, & CHILDBIRTH and activities, or discussions that makes sense to you. Use enough detail to convince me that you understand

Decided to enter into a long-term contract : HomeGrown is a small restaurant that specializes in serving local fruits, vegetables and meats. The company has chosen to enter into a long-term relationship with Family Farms, a local farming operation. The two parties have decided to enter into a l..

Determine the incremental rate of return : A fleet manager must choose between two trucks to purchase for a company's fleet. The company will keep either truck for 4 years. Truck A costs $29,000 and has a market value of $16,000 after 4 years. Truck B costs $33,000 and has a market value of $..

User Account

All Pages