If Markets Are in Equilibrium, Which of the Following Conditions

question 56

Multiple Choice

If markets are in equilibrium, which of the following conditions will exist?

• A) each stock's expected return should equal its required return as seen by the marginal investor.
• B) all stocks should have the same expected return as seen by the marginal investor.
• C) the expected and required returns on stocks and bonds should be equal.
• D) all stocks should have the same realized return during the coming year.
• E) each stock's expected return should equal its realized return as seen by the marginal investor.

---

Definitions:

Price Sensitivity

The degree to which the price of a product affects consumers' buying behaviors or the demand for the product.

Substitution Risk

The potential loss or decrease in market share due to consumers opting for alternative products or services.

Cross Subsidy

A pricing strategy where the revenue or profits from one product or service are used to support another within the same company, often to gain competitive advantage.

High Margin

Refers to products or services that yield a significantly greater profit relative to their cost.