For Markets to Be in Equilibrium,that Is,for There to Be $\tilde r$

question 143

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

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Definitions:

Cumulative Binomial Probabilities

The sum of probabilities of achieving a given number of successes in a fixed number of Bernoulli trials.

Relative Frequency

The ratio of the number of times a specific value or event occurs to the total number of occurrences in a given dataset.

Population

The entire group of individuals or instances about whom the research is concerned.

Expected Value

The weighted average of all possible values a random variable can take on, with the weights being the probabilities of each outcome.