Proponents of the Bubble View Believe That When Using Historical

question 26

Multiple Choice

Proponents of the bubble view believe that when using historical averages to estimate an equity premium,

• A)the average should be based on the last 10 to 15 years of historical data only since earlier data is no longer descriptive of current conditions, e.g., bubbles.
• B)the average should be calculated using data from the earliest recorded point in time in order to ensure that any temporary bubbles are smoothed out.
• C)the equity premium will be lower after recent market surges.
• D)the equity premium will be higher after recent market surges.

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Definitions:

Purchases Returns and Allowances

Transactions where buyers return damaged or unsatisfactory products to the seller, or receive a price reduction as compensation.

Merchandiser

A person or company involved in the business of purchasing goods and selling them at retail or wholesale.

Net Income

The income a company ultimately makes after all operational costs and taxes are deducted from revenue.

Buying and Selling Merchandise

The process of purchasing goods to resell at a higher price, typically found in retail or wholesale businesses.