From an investor's perspective, if the foreign exchange market is efficient, information about expected changes in exchange rates should be widely known and thus reflected in a firm's market value. Only ________ in exchange rates or an ________ foreign exchange market, should cause market value to change.
A) expected changes; efficient
B) unexpected changes; efficient
C) expected changes; inefficient
D) unexpected changes; inefficient

Question

Quizplus · Accepted Answer

In an efficient market, all known information is already reflected in prices. Therefore, only unexpected changes or an inefficient market would cause a change in market value.

From an Investor's Perspective, If the Foreign Exchange Market Is