Question

Which basic principle of finance correctly describes the following​ statement: ​ "Investors respond to new information by buying and selling their investments. The speed with which investors act and the way that prices respond to the information determine the efficiency of the​ market"? ​(Select the best choice​ below.)

A.Principle​ 1: Money has a time value.
B.Principle​ 2: There is a​ risk-return tradeoff.
C.Principle​ 3: Cash flows are the source of value.
D.Principle​ 4: Market prices reflect information.

Answer 1

The correct basic principle of finance that describes the statement is Principle 4: Market prices reflect information.

Step-by-step explanation:

The correct basic principle of finance that describes the statement is Principle 4: Market prices reflect information. This principle states that investors respond to new information by buying and selling their investments, and the efficiency of the market is determined by the speed of investor actions and how prices respond to the information.