ch06 - Financial Markets and Institutions 6e(Mishkin/Eakins...

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Financial Markets and Institutions, 6e (Mishkin/Eakins)  Chapter 6    1
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Are  Financial  Markets  Efficient? 6.1 
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Mul tiple  Cho ice
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1) 
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How  expectations are formed is important because expectations influence  A) 
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the demand for  assets.  B) 
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bond prices.  C) 
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the risk  structure of interest rates.  D) 
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the term  structure of interest rates.  E) 
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all of the above.  Answer:  
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Question Status: 
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Previous Edition 2) 
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Accordin g to the efficient market hypothesis, the current price of a financial security  A) 
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is the  discounted net present value of future interest payments.   B) 
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is determined  by the highest successful bidder.  C) 
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fully reflects all  available relevant information.  D) 
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is a result of  none of the above.  Answer:  
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Question Status: 
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Previous Edition 3) 
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The  efficient market hypothesis  A) 
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is based on the  assumption that prices of securities fully reflect all available information.  B) 
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holds that the  expected return on a security equals the equilibrium return.  C) 
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both A and B.  D) 
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neither A nor B.  Answer:  
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Question Status: 
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Previous Edition 4) 
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If the  optimal forecast of the return on a security exceeds the equilibrium return, then  A) 
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the market is  inefficient.  B) 
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an unexploited  profit opportunity exists.  C) 
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the market is in  equilibrium.  D) 
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ch06 - Financial Markets and Institutions 6e(Mishkin/Eakins...

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