C708 Finance terms Exam Questions with 100% Correct Answers | Graded A+

Valuation - the ability to accurately estimate what an asset is worth in "economic terms". The estimated amount of money that a rational person would pay based on the economic benefits that the asset is expected to produce Risk - uncertainty. Investors are risk averse, meaning they dislike risk and try to avoid it. Factors that determine value - Cash flow, risk, time, opportunity costs Perfect competition - there are so many competitors and similar products that prices are driven to their minimum level. In the long run, companies do not make an economic profit. Weak form EMH - long-term returns in excess of the market are possible by conducting superior fundamental research and analysis of stocks, bonds, and markets. Semi-strong form EMH - it is believed that asset prices reflect all publicly available information, and that prices instantly change to reflect new public information. Strong form EMH - it is believed that asset prices reflect all publicly available and non-public "insider" information, and that prices instantly change to reflect both types of information. Efficient markets - essential to determining fair valuations , allow an efficient transfer of capital from savers to businesses in need of capital to grow their operations, and provide liquidity to investors who may want to sell their investments because the need cash Liquidity - facilitates transactions, provides cash for borrowers, promotes the efficient flow of capital in an economy