Question

Which of the following statement is NOT correct? None of the above The default risk of...

Which of the following statement is NOT correct?

None of the above

The default risk of T-bill is High

If the Efficient Markets Hypothesis is true, all stocks are correctly priced

The default risk of T-bill is Low

If the Efficient Markets Hypothesis is NOT true, some information is not reflected in the stock price
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Answer #1

Solution

ANSWER-The default risk of T-bill is High

The default risk of T-bill is High-This statement is not true as these are one of the safest instruments as they are backed by US government gurantee,thus have almost 0 default risk

If the Efficient Markets Hypothesis is true, all stocks are correctly priced-This is true because in this case all the info will be available to all and thus the stocks will be correctly priced

The default risk of T-bill is Low-This statement is true as these are one of the safest instruments as they are backed by US government gurantee,thus have almost 0 default risk

If the Efficient Markets Hypothesis is NOT true, some information is not reflected in the stock price-This statement is also true as if EMH is not true some of the information will not be reflected in stock price and it will not be priced correctly

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