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sertanlavr [38]
3 years ago
11

Which of the following statements are true if the efficient market hypothesis holds? It implies that future events can be foreca

st with perfect accuracy. It implies that prices reflect all available information. It implies that security prices change for no discernible reason. It implies that prices do not fluctuate.
Business
1 answer:
Pachacha [2.7K]3 years ago
6 0

Answer:

The correct answer is b. It implies that prices reflect all available information.

Explanation:

The efficient market hypothesis is a theory initially enunciated by Eugene Fama (1970). It states that the current price of an asset in the market reflects all available information that exists (historical, public and private).

This theory considers that any news or future event that may affect the price of an asset will make the price adjust so quickly that it is impossible to obtain an economic benefit from it. Given this, it is considered a waste of time and money to try to analyze the values, since there will be no undervalued or overvalued assets in the market.

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Consider a risky portfolio. The end-of-year cash flow derived from the portfolio will be either $120,000 or $300,000 with equal
Ivanshal [37]

Answer:

a. If you require a risk premium of 8%, how much will you be willing to pay for the portfolio?

the expected value of our portfolio = ($120,000 x 50%) + ($300,000 x 50%) = $210,000

the current market price of the investment = $210,000 / 1.13 = $185,840.71

discount rate = 5% + 8% = 13%

b. Suppose the portfolio can be purchased for the amount you found in (a). What will the expected rate of return on the portfolio be?

13%, it should be equal to the discount rate

c. Now suppose you require a risk premium of 15%. What is the price you will be willing to pay now?

the current market price of the investment = $210,000 / 1.21 = $175,000

discount rate = 5% + 15% = 20%

d. Comparing your answers to (a) and (c), what do you conclude about the relationship between the required risk premium on a portfolio and the price at which the portfolio will sell?

the higher the risk premium, the lower the market price of the portfolio

4 0
3 years ago
On July 1, 2008, Blitzer Inc. signed a one-year, 6% interest-bearing note payable for $5,000. Blitzer Inc. has a December 31 yea
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Answer:

interest expense = $150

Explanation:

the journal entry to record accrued interest:

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Which option correctly describes a benefit of using professional networking websites? OA Reach out to friends and relatives for
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Answer:

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6 0
2 years ago
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Answer:

Jenkins Manufacturing

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Total costs = $82,500

Operating Loss = $19,500 ($63,000 - 82,500)

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3 years ago
___ costs are easily identified because a recent market transaction is available to provide an accurate measure of costs implici
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I believe the correct answer from the choices listed above is the third option. Explicit costs are easily identified because a recent market transaction is available to provide an accurate measure of costs. It <span>is a direct payment made to others in the course of running a business, such as wage, rent and materials.</span>
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