1) What does the concept of an efficient market imply?

a) Prices reflect all available information.

b) All shares of stock have the same market beta.

c) Selecting stocks by throwing darts at a page of stocks will yield the same return as a carefully selected portfolio.

d) Stock prices do not fluctuate.

2) If an investor subscribes to the strong form EMH, their investment decisions would be limited to:

a) Choosing low risk stocks and bonds.

b) Not investing through the financial system whatsoever.

c)Choosing financial instruments that he believed were undervalued.

d) Deciding on his personal risk tolerance and choosing a portfolio of instruments which matched this risk level.

3) What is the discounted payback period of a project whose profitability index is higher than 1?

a) Less than the project lifetime

b) Not enough information to answer the question

c) Equal to the project lifetime

d) Greater than the project lifetime