1. You are the chief financial officer of Donnelly Industries. On multiple occas

Question

1. You are the chief financial officer of Donnelly Industries. On multiple occasions, you have engaged in insider trading but have never been able to earn any abnormal returns. Which form of market efficiency most likely exists given your situation?

A. mild-form

B. weak-form

C. historical-form

D. semi-strong form

E. strong-form

2. If the markets are efficient, then why is asset allocation still considered important?

A. because the risk-return relationship must still be considered

B. because market timing is critical in efficient markets

C. because individual security selection is the key to the markets being efficient

D. because asset allocation combines market timing with individual security selection

E. because the majority of market gains tend to occur only over long periods of time

3. Which one of the following terms is used to identify the evaluation method that determines the value of a stock by reviewing a firm's financial statement in conjunction with other financial and economic information?

A.technical analysis

B. conceptual analysis

C. prediction valuation

D. fundamental analysis

E. discounted valuation

Explanation / Answer

Solution-1

E. strong-form

Explanation-

If the market is strong-form efficient then all new information gets reflected in stock prices very quickly.

Solution-2

A. because the risk-return relationship must still be considered

Explanation-

For the assets allocation risk must be considered because without considration of risk return should not be possible.

Solution-3

D. fundamental analysis

Explanation-

With the help of fundamental analysis company able to analyse the forecast and profit from future price movements.

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