Question

Part Il Multiple chalet Ple a s h poed 1. Which of the following is a chanc e of market A large number of value-maximizing investors No barriers to trading exist TO Renerally asus slowly at Value Transaction costs are minimal or non-existent Investors should expect to earn fair rates of return on their investments 2. The Efficient Markets Hypothesis Has been proved in all forms Has been proved in the weak form, but not others Has been proved in the semi-strong form and the weak form d. Has been disproved in the semi-strong form Cannot be proved or disproved in any form 3. The idea that different interest rates for short and long-term bonds are based on different levels of supply and demand for each maturity is stated by which theory of term structure of interest rates? Expectations theory Maturity Preference theory Market Segmentation theory d. Treasury Curve theory None of the above A forward interest rate is: An interest rate on an investment with maturity longer than one year b. Any interest rate that is higher than today's one-year interest rate An interest rate projected for a future time period d. An interest rate that is guaranteed for the future None of the above If markets are weak form efficient (but not semi-strong or strong form efficient). Investors cannot beat the market using technical analysis b. Investors cannot beat the market using fundamental analysis c. Insiders cannot beat the market d. All of the above statements are true e. Both (a) and (b) are true, but not (c) 6. If markets are strong form efficient Only insiders can make consistent excess profits b. Only technical analysts can make consistent excess profits c. Only fundamental analysts can make consistent excess profits d. No one can make consistent excess profits e. Anyone potentially can make consistent excess profit If a stock pays no dividend The stock has no market value b. The stock has no intrinsic value c. The value cannot be estimated The value can be estimated from the projected earnings None of the above statements are true

Answer 1

1) Option: Prices generally adjust slowly to new information about value.

The above statement is not a characteristic of efficient market. An efficient market discounts new information immediately, and the stock prices are adjusted immediately to the new information. The slower the adjustment to new information the lesser is the market efficiency.