Question

An efficient capital market is one in which: A) All securities that investors desire are offered...

An efficient capital market is one in which:

A) All securities that investors desire are offered

B) All transactions are closed within two business days

C) Current prices reflect all current information

D) The lowest interest rates are offered

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Homework Answers

Answer #1

C.Current prices reflect all current information.

An efficent capital market incorporates all current information into stock prices, so that no one would be able to take advantage of any unknown price sensitive information.

In other words, an efficient capital market eliminates any price sensitive information to not be disclosed immediately to stock market.

Offering all securities investors desire, closing transactions within two days and offering lowest interest rates are not an essential features of efficient capital markets.

They may be good features, but these features donot determine the efficiency of capital market.

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