If Relevant Information Can Be Obtained at No Cost, People

question 174

Multiple Choice

If relevant information can be obtained at no cost, people are ________ when they fail to use all available information given that there are usually ________ to making a wrong forecast.

• A) behaving rationally; costs
• B) behaving rationally; no costs
• C) not behaving rationally; costs
• D) not behaving rationally; no costs

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Definitions:

Initial Cash Outlay

The upfront amount of cash needed to initiate a project or investment, including acquisition costs and other initial expenses.

SML Approach

Stands for Security Market Line, a graphical representation that shows the expected return of an investment as a function of its risk.

Cost of Equity

The return that investors require for an investment in a firm's equity, representing the compensation for bearing risk.

Growth Rate

The rate at which a company's earnings or revenue increases over a specified period.