For This Question,assume That There Is Perfect Arbitrage in the Stock

question 42

Multiple Choice

For this question,assume that there is perfect arbitrage in the stock market.Given this assumption,economists believe that

• A)movements in stock prices can be easily predicted.
• B)movements in stock prices are largely unpredictable.
• C)most stocks will diverge from their fundamental value.
• D)stocks will generally earn a lower rate of return than bonds.
• E) the rate of return on stocks will be equal to the rate of return on bonds.

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Definitions:

Marginal Utility

The extra pleasure or benefit a person receives from using an additional unit of a product or service.

Unlimited Income

A theoretical concept implying an income level with no upper limit, allowing for an unrestricted ability to purchase goods and services.

Potato Chips

Thin slices of potato that are deep fried or baked until crispy, often served as a snack.

Price of Cola

The amount of money required to purchase a unit or specified quantity of cola.