Question

The concept of market efficiency underpins almost all financial theory and decision models. When financial markets are efficient, the price of a security—such as a share of a particular corporation’s common stock—should be _________(equal to or more than) the present value estimate of the firm's expected cash flows discounted by its appropriate rate of return.

Answer 1

Equal

Step-by-step explanation:

Market efficiency is the term which is defined as the degree to which the prices of the product in the market reflect or state all the relevant as well as available information.

When the market are efficient, then all the information is incorporated into the prices and there is no method to beat the market as there is no overvalued or undervalues securities will be available.

So, the financial market are efficient, then the price of the security is equal to the present value of expected cash flows of the firm.