If the Optimal Forecast of the Return on a Security

question 89

Multiple Choice

If the optimal forecast of the return on a security exceeds the equilibrium return,then

• A)the market is inefficient.
• B)no unexploited profit opportunities exist.
• C)the market is in equilibrium.
• D)the market is myopic.

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Definitions:

Cognitive Abilities

The mental capabilities that involve reasoning, problem solving, planning, abstract thinking, complex idea comprehension, quick learning, and learning from experience.

Single Solution

A method or answer that addresses a problem or question in one definitive way, without considering alternatives.

Nonconformists

Individuals who refuse to follow established ways of thinking or acting and instead, embrace uniqueness and individuality.

Convergent Thinking

A cognitive process involving the focusing of ideas and solutions toward determining a single best solution to a problem.