Which of the Following Summarizes the Classical Theory of Asset

question 13

Multiple Choice

Which of the following summarizes the classical theory of asset prices? I. An asset price equals the present value of expected income from the asset.
II) Expected income is the second best possible forecast based on all public information.
III) The interest rate in the present value formula is the safe interest rate plus a risk premium.

• A)I only
• B)II only
• C)III only
• D)I and III

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Definitions:

Real Disposable Income

The income of individuals or the nation after adjusting for inflation, representing the amount of money that households have available for spending and saving after income taxes have been accounted for.

U.S. Exports

Goods or services produced within the United States and sold to buyers in other countries, contributing to the country's economy.

Net Exports

The difference between a country's total value of exports and total value of imports.

Real Domestic Income

The total income of a country's residents and businesses adjusted for inflation, reflecting the real purchasing power.