If the Optimal Forecast of the Return on a Security

question 22

Multiple Choice

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

• A) the market is inefficient.
• B) an unexploited profit opportunity exists.
• C) the market is in equilibrium.
• D) only A and B of the above are true.
• E) only B and C of the above are true.

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Definitions:

Invoice Price

The price listed on an invoice, representing the amount charged by the seller to the buyer for goods or services.

Settlement Date

The date on which a trade is finalized or settled, with the transfer of securities and cash between buyer and seller.

Liability Record

Documentation or entries that list the obligations or debts of a business that it must repay to others.

Exchange Rates

The rate at which one currency can be exchanged for another, affecting the value of foreign currency transactions and financial reporting.