The financial markets allocate capital to corporations by

Question

Quizplus · Accepted Answer

The financial markets reflect the expectations of market participants through the prices of corporations. Investors and traders make decisions based on their expectations of a company's future financial performance, which is reflected in the stock prices. As a result, the market allocates capital to corporations based on their perceived future performance, as reflected in their stock prices.

B, C, and D are not accurate statements. B suggests that companies with lower risk receive higher returns, which is not always the case. C suggests that companies with expected high returns receive lower stock prices, which is also not accurate. D suggests that investment bankers have the sole authority to allocate capital, which is not true.

The Financial Markets Allocate Capital to Corporations by