[Solved] Another Way to State the Efficient Markets Hypothesis Is: in an Efficient

Q50: On rainy days,Jennifer's commute time to work averages 45 minutes. Before leaving,Jennifer hears on the radio that a street on her route is closed due to high water. She plans to add an additional 15 minutes to her commute because of the detour. This decision represents A)rational expectations. She is changing her expectations to reflect new information. B)adaptive expectations. She is adapting her plan to what she heard. C)irrational expectations. Everyone knows that radio news is unreliable. D)irrational expectations. She should just call in sick and not get out in the bad weather.

Q51: Suppose Barbara looks out in the morning and sees a clear sky so decides that a picnic for lunch is a good idea. Last night the weather forecast included a 100% chance of rain by midday but Barbara did not watch the local news program. Is Barbara's prediction of good weather at lunch time rational? Why or why not?

Q52: The theory of rational expectations,when applied to financial markets,is known as A)monetarism. B)the efficient markets hypothesis. C)the theory of strict liability. D)the theory of impossibility.

Q53: According to the efficient markets hypothesis,the current price of a financial security A)is the discounted net present value of future interest payments. B)is determined by the lowest successful bidder. C)fully reflects all available relevant information. D)is a result of none of the above.

Q54: If the optimal forecast of the return on a security exceeds the equilibrium return,then A)the market is inefficient. B)no unexploited profit opportunities exist. C)the market is in equilibrium. D)the market is myopic.

Q56: ________ occurs when market participants observe returns on a security that are larger than what is justified by the characteristics of that security and take action to quickly eliminate the unexploited profit opportunity. A)Arbitrage B)Mediation C)Asset capitalization D)Market intercession

Q57: The efficient markets hypothesis suggests that if an unexploited profit opportunity arises in an efficient market A)it will tend to go unnoticed for some time. B)it will be quickly eliminated. C)financial analysts are your best source of this information. D)all profits will be eliminated through taxation.

Q58: Financial markets quickly eliminate unexploited profit opportunities through changes in A)dividend payments. B)tax laws. C)asset prices. D)monetary policy.

Q59: The elimination of unexploited profit opportunities requires that ________ market participants be well informed. A)all B)a few C)zero D)many

Q60: If future changes in stock prices are unpredictable,then we say that the stock prices follow a A)random walk. B)straight and narrow path. C)meandering path. D)generalized walk.