Part 1: If the markets are efficient, the price of a security should reflect all information that has an affect on its value.

a. True

b. False

Part 2: If financial markets are efficient, how likely is it for someone reading the published annual reports of companies, which come out in February/March or later of the following year, to use this information to consistently select stocks that outperform the market?

a. If the market is strong form efficient, they should be able to do this.

b. Since annual reports contain a review of what happened to the company over a year ago, in an efficient market you should not be able to do this consistently.

c. Since annual reports contain only new, private information. When they are released to the public, they contain information that investors can profit from consistently.

d. None of the above.

Part 3: If financial markets are semi-strong-form efficient, security prices will incorporate __________; however, if financial markets are strong-form efficient, asset prices will reflect __________.

a. all publicly available information about a company; all relevant public and private information

b. all pertinent historical and current information; all information from public sources

c. all pertinent historical, current and predictable future information from public and private sources; all information available from public sources

d. all information relevant to the level of stock prices; all information regarding patterns of stock price and trading volume