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:

Over-Inflated

Refers to a situation where an object, such as a tire, is filled with air or gas beyond the recommended pressure.

Center Of Treads

The midpoint across the width of tire treads, often used as a measurement reference for tire alignment and wear.

Accelerated Wear

Increased rate of wear on materials or components, often due to excessive loading, poor lubrication, or abrasive conditions, leading to premature failure.

Bias Ply

A tire construction geometry in which the plies are laid either diagonally or at an angle of 35 degrees.