Which of the following statements about market efficiency is generally considered to be true?

Multiple Choice

• On average, most stocks are mispriced.

• In the absence of legal constraints, investors with inside information will be able to earn excess returns.

• Short-run price changes occur independent of information coming to the market.

• It is easy to forecast the direction of future security price changes in the short run.

• For inefficient markets, security prices will rapidly reflect new information.

Use the following mutually exclusive investment cash flows for the question(s) below: Year 3 Project A Year o $200 $275) Year 1 $100 $125 Year 2 $100 $125 $100 $125 B Based on the payback criterion, which of the following is NOT true? Multiple Choice With a payback cutoff of 2.5 years, both projects are acceptable. With a payback cutoff of 1.75 years, only Project A is acceptable. With a payback cutoff of three years, both projects are acceptable. With a payback cutoff of 1.5 years, neither project is acceptable. If you choose the project that pays back the fastest, Project A is preferred