If the Optimal Forecast of the Return on a Security

question 89

Multiple Choice

If the optimal forecast of the return on a security exceeds the equilibrium return,then

• A)the market is inefficient.
• B)no unexploited profit opportunities exist.
• C)the market is in equilibrium.
• D)the market is myopic.

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Definitions:

Sensitivity Analysis

A technique used to determine how different values of an independent variable affect a particular dependent variable under a given set of assumptions.

Break-even Point

The financial point at which total costs equal total revenue, meaning that the business is neither making a profit nor a loss.

Cost-volume-profit Analysis

An accounting technique used to determine how changes in costs and volume affect a company's operating income and net income.

Sales Mix

The relative distribution of sales among the various products available for sale.