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In an efficient market, _______.

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Investors act rationally

Transaction costs are minimal

Information is translated as fast as possible

All of the above

All of the above. These are all essential if a market is to be efficient.

Academics have challenged the efficient market theory because _______.

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It completely collapsed

Several irregularities have been observed

It has not made them rich

All of the above

Several irregularities have been observed. Academics have noted many irregular phenomena that caused them to call the theory into question.

Which market index tracks 500 of the largest US company stocks?

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Dow Jones

Wilshire 500

Standard and Poor's

Standard and Poor's. Standard and Poor's tracks 500 of the largest US company stocks.

Index mutual funds attempt to beat the market.

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True

False

False. Index funds try to match the market.

In an efficient market, only new information about a security can change its price.

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True

False

True. According to the theory, prices react to new information.

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