X hits on this document

125 views

0 shares

2 downloads

0 comments

19 / 27

Chapter 7 The Stock Market, the Theory of Rational Expectations, and the Efficient Markets Hypothesis 255

86)

According to the efficient markets hypothesis

(a)

one cannot expect to earn an abnormally high return by purchasing a security.

(b)

information in newspapers and in the published reports of financial analysts is already reflected in market prices.

(c)

unexploited profit opportunities abound, thereby explaining why so many people get rich by trading securities.

(d)

all of the above are true.

(e)

only (a) and (b) of the above are true.

Answer:

Question Status: Revised

87)

Important implications of the efficient markets hypothesis include:

(a)

future changes in stock prices should, for all practical purposes, be unpredictable.

(b)

stock prices will respond to announcements only when the information in these announcements is new.

(c)

sometimes a stock price declines when good news is announced.

(d)

all of the above.

(e)

only (a) and (b) of the above.

Answer:

Question Status: Revised

88)

You read a story in the newspaper announcing the proposed merger of Dell Computer and Gateway. The merger is expected to greatly increase Gateway’s profitability. If you decide to invest in Gateway stock, you can expect to earn

(a)

above average returns since you will share in the higher profits.

(b)

above average returns since your stock price will definitely appreciate as higher profits are earned.

(c)

below average returns since computer makers have low profit rates.

(d)

a normal return since stock prices adjust to reflect expected changes in profitability almost immediately.

(e)

none of the above.

Answer:

Question Status: Study Guide

89)

Assume a stock’s price falls after higher quarterly profits are announced. This occurrence is

(a)

clearly inconsistent with the efficient markets hypothesis.

(b)

possible if market participants expected lower profits.

(c)

consistent with the efficient markets hypothesis.

(d)

not possible.

Answer:

Question Status: Study Guide

Document info
Document views125
Page views131
Page last viewedFri Dec 09 12:37:00 UTC 2016
Pages27
Paragraphs1683
Words7804

Comments