Which of the Following Is Correct Concerning Stock Market Irrationality

question 175

Multiple Choice

Which of the following is correct concerning stock market irrationality?

• A)Speculative bubbles could arise, in part, because the price that people pay for stock depends on what they think someone else will pay for it in the future.
• B)Economists almost all agree that the evidence for stock market irrationality is convincing and the departures from rational pricing are important.
• C)Some evidence for the existence of market irrationality is that informed and presumably rational managers of mutual funds generally beat the market.
• D)The value of the stock depends only on the stream of future dividend payments.

Recognize the prevalence and epidemiology of psychological disorders.

Understand the role of genetics and heritability in psychological disorders.

Grasp the concept of anxiety, its disorders, and their specific characteristics.

Comprehend phobias and their triggers based on Seligman's concept of "preparedness".

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Definitions:

Internal Rate

Often referred to as the Internal Rate of Return (IRR), it is the interest rate at which the net present value of all the cash flows (both positive and negative) from a project or investment equal zero.

Payback Method

A simplistic financial analysis tool used to determine the time required for the earnings from an investment to repay the initial investment cost.

NPV Profile

A graphical representation showing the relationship between the net present value (NPV) of a project and various discount rates, helping to analyze the investment's sensitivity to changes in cost of capital.

MIRR

Modified Internal Rate of Return, a financial metric used to assess the profitability of investments, adjusting for different cash inflow and outflow timings.