If Markets Are in Equilibrium,which of the Following Conditions Will

question 1

Multiple Choice

If markets are in equilibrium,which of the following conditions will exist?

• A) Each stock's expected return should equal its realized return as seen by the marginal investor.
• B) Each stock's expected return should equal its required return as seen by the marginal investor.
• C) All stocks should have the same expected return as seen by the marginal investor.
• D) The expected and required returns on stocks and bonds should be equal.
• E) All stocks should have the same realized return during the coming year.

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Definitions:

Carrying Value

The book value of an asset or liability on a company's balance sheet, calculated as original cost minus accumulated depreciation or amortization.

Ordinary Gain

A profit resulting from the sale or exchange of assets used in a business, not classified as capital gains.

Restructured Loan

A loan that has had its terms modified by agreement between the borrower and lender, often to provide relief to a borrower from the original terms due to financial difficulty.

Discount Future Cash Flows

The process of determining the present value of a series of future cash flows by applying a discount rate, reflecting the time value of money.