A. Read the following statement and determine if it is TRUE of FALSE:

1. If financial markets are efficient and all securities are fairly priced, then all securities must offer equal expected rates of return.

2. Securities that reflect highly variable prices suggest that the market does not know how to price the security accurately.

3. Reid Aerial Systems has never missed or reduced a dividend payment in its 50-year history. If you believe the markets are efficient this information should have NO effect on your likelihood of adding this stock to your portfolio.

4. Syndergaard Industries, just announced a decrease in its annual earnings, yet its stock price rose. There is a potentially rational explanation for this phenomenon.

5. The Efficient Market Hypothesis implies that technical analysis has added value to security analysis.

B. What would happen to market efficiency if all investors attempted to follow a passive strategy?

	A. Market efficiency will stay the same.
	B. Market efficiency will decrease.
	C. Market efficiency will increase.
	D. Not enough information to answer the question.