1- The efficient market hypothesis states that:

A. requiring investors to hold securities longer will reduce volatility.

B. taxing security returns will raise prices.

C. markets price securities fairly at all times and that new information is rapidly reflected in the price.

D. requiring firms to issue more stock will reduce volatility.

E. electing a pro−business Republican president makes the market more efficient.

2- The reason why investors may think that the markets operate efficiently is? because:

A. If a security is mispriced investors will avoid it until the price corrects.

B. Many investors are looking for the same? thing, a good deal. When one is found they will either buy or sell it until the good deal? disappears, thus driving it back to its correct price.

C. Most investors react slowing to the release of information allowing the markets to buffer and correct for misinformation.

D. Very? intelligent, well-informed, and educated people in key positions work to keep prices correct at all times.