For a Stock to Be in Equilibrium, That Is, for There

question 25

Multiple Choice

For a stock to be in equilibrium, that is, for there to be no long-term pressure for its price to depart from its current level, then

• A) the expected future return must be less than the most recent past realized return.
• B) The past realized return must be equal to the expected return during the same period.
• C) the required return must equal the realized return in all periods.
• D) the expected return must be equal to both the required future return and the past realized return.
• E) the expected future returns must be equal to the required return.

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Definitions:

General Journal

A primary accounting record used for recording all types of transactions and events, ensuring every financial activity is documented.

Special Journal

A financial journal designed for recording a specific type of transaction in a more efficient manner.

Accrual Basis

An accounting method where revenues and expenses are recorded when they are earned or incurred, regardless of when the cash transaction occurs.

Cash Basis

An accounting method where revenues and expenses are recorded only when cash is received or paid out, regardless of when the transactions occurred.