1. If markets are efficient, when new information about a stockbecomes available, the price will:
a. remain unchanged because it already reflects thisinformation.
b. accurately and rapidly adjust to include this newinformation.
c. adjust to accurately reflect this new information over thecourse of the next few days.
d. most likely increase because all new information has apositive effect on stock prices.
2. Which one of these is included in the yield of a bond with alow credit rating but not included in a U.S. Treasury bond yield?Assume both bonds are selling at a premium.
a. Real rate of return
b. Inflation premium
c. Default premium
d. Loss of premium
3. Market efficiency implies
a. that investors are irrational.
b. that there is no point to buying common stocks.
c. that consistently superior performance is very difficult evenfor professional investors.
d. that there are no taxes.
