Practice Quiz

FRM Financial Risk Manager Practice Test - Question List

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21. According to the Efficient Market Hypothesis (EMH), a market is said to be efficient if prices in that market reflect all available information. Is this following statement true or false?“It is possible to consistently outperform the market by taking advantage of all the information that the market already knows”
  1. True
  2. False
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22. True or false: The Efficient Markets Hypothesis (EMH) states that a stock's current price correctly predicts the underlying company's future results.
  1. True
  2. False
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23. True or false: Behind the random walk model, current price is the best prediction of future prices.
  1. True
  2. False
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24. In the random walk hypothesis, rates of return must meet which of the following conditions?
  1. Independent over time.
  2. Identically distributed.
  3. Uncorrelated.
  4. Independently and identically distributed.
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25. A portfolio is a collection of investments made by individuals or institutions. The market portfolio then is:
  1. A collection of investments into a specific market.
  2. A collection of all securities where the amount invested in each security is proportional to its relative market value.
  3. A collection of all securities available in a specific market and the amount invested is the same for every security.
  4. A collection of all investments in a whole economy.
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