For Markets to Be in Equilibrium, That Is, for There

question 5

Multiple Choice

For markets to be in equilibrium, that is, for there to be no strong pressure for prices to depart from their current levels,

• A) The expected rate of return must be equal to the required rate of return; that is, = r.
• B) The past realized rate of return must be equal to the expected future rate of return; that is, = .
• C) The required rate of return must equal the past realized rate of return; that is, r = .
• D) All three of the above statements must hold for equilibrium to exist; that is = r = .
• E) None of the above statements is correct.

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Definitions:

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A general agreement among all members of a group or community, often reached through negotiation and discussion.