The Stock Market Crash of October 1987 and the Great

question 42

Multiple Choice

The stock market crash of October 1987 and the Great Crash of 1929, although not fully explained, may be (partially) explained by:

• A) new information coming to the market; being efficient the market was priced down.
• B) technical difficulties in order processing.
• C) the bubble theory that prices move wildly above equilibrium values and eventually fall back to equilibrium causing large losses.
• D) the conspiracy theory that large institutions and rich investors control the market and caused the general population to suffer large wealth losses.

---

Definitions:

Financial Asset

A financial asset refers to any asset that is cash, a contractual right to receive cash or another financial asset from another entity, or a contractual right to exchange financial instruments with another entity under conditions that are potentially favorable.

Claim

A demand for something as due, often referring to a right to payment or other benefits.

Interest Rate Collar

A financial derivative strategy used to hedge interest rate movements by setting upper and lower limits on interest payments.

Variable Rate Loan

A loan where the interest rate can change over time, based on an underlying benchmark or index.