207 $
© 2014 Pearson Canada Inc.$
The number and availability of discount brokers has grown rapidly since the mid-1970s. The
efficient markets hypothesis predicts that people who use discount brokers ____.
A) will likely earn lower returns than those who use full-service brokers
B) will likely earn about the same as those who use full-service brokers, but will net more after
brokerage commissions
C) are going against evidence suggesting that full-service brokers can help outperform the
market
D) are likely to outperform the market by a wide margin
Answer: B
Diff: 2 Type: MC Page Ref: 7A. 1 - 2
Topic: Questions for Web Appendix on the Efficient Market Hypothesis
Skill: Recall
Objective List: Appendix: Evidence on the Efficient Market Hypothesis
When Happy Feet Corporation announces that their fourth quarter earnings are up 10 percent,
their stock price falls. This is consistent with the efficient markets hypothesis ____.
A) if earnings were not as high as expected
B) if earnings were not as low as expected
C) if a merger is anticipated
D) the company just invented a new bunion product
Answer: A
Diff: 2 Type: MC Page Ref: 7A.1- 2
Topic: Questions for Web Appendix on the Efficient Market Hypothesis
Skill: Recall
Objective List: Appendix: Evidence on the Efficient Market Hypothesis
To say that stock prices follow a "random walk" is to argue that stock prices ____.
A) rise, then fall, then rise again
B) rise, then fall in a predictable fashion
C) tend to follow trends
D) cannot be predicted based on past trends
Answer: D
Diff: 2 Type: MC Page Ref: 7A.1- 2
Topic: Questions for Web Appendix on the Efficient Market Hypothesis
Skill: Recall
Objective List: Appendix: Evidence on the Efficient Market Hypothesis