According to the efficient markets hypothesis,
A) common stock prices should be constant.
B) the price of a corporation's stock is likely to fluctuate substantially in response to news about changes in the company's short-term prospects.
C) the price of a corporation's stock will fluctuate significantly only in response to news about changes in the company's long-term prospects.
D) price fluctuations in common stock are a response to fads and are only infrequently the result of changes in the expected profitability of the companies involved.
C
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The business cycle is usually illustrated using movements in
A) the inflation rate. B) labor productivity. C) real GDP. D) the size of the labor force.
A risk premium
A) is required to get a risk-neutral person to make a fair bet. B) is the maximum amount needed to compensate a decision-maker to willingly take a risk. C) is the maximum amount a decision-maker would pay to avoid taking a risk. D) is the minimum amount a decision-maker would pay to avoid taking a risk.