Assume That There Is Perfect Arbitrage in the Stock Market

question 47

Multiple Choice

Assume that there is perfect arbitrage in the stock market. Given this information, economists believe that:

• A) the rate of return on stocks will be equal to the rate of return on bonds.
• B) most stocks diverge widely from their fundamental value.
• C) movements in stock prices are largely unpredictable.
• D) stocks will generally earn a lower rate of return than bonds.
• E) movements in stock prices can be easily predicted.

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Definitions:

Blind

A condition characterized by the lack of visual perception due to physiological or neurological factors, which can range from partial to total inability to see.

Breathing-Related Sleep Disorder

Group of sleep disorders characterized by numerous brief sleep disturbances due to problems breathing.

Apnea

A temporary cessation of breathing, especially during sleep, which can lead to various health complications.

Excessive Sleepiness

A condition where an individual experiences significant and persistent drowsiness despite adequate or even prolonged night-time sleep.