Which of the Following Is Correct Concerning Stock Market Irrationality

question 13

Multiple Choice

Which of the following is correct concerning stock market irrationality?

• A)Bubbles could arise,in part,because the price that people pay for stock depends on what they think someone else will pay for it in the future.
• B)Economists almost all agree that the evidence for stock market irrationality is convincing and the departures from rational pricing are important.
• C)Some evidence for the existence of market irrationality is that informed and presumably rational managers of mutual funds generally beat the market.
• D)All of the above are correct.

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Definitions:

Permanent Accounts

Accounts that carry their balances over into the next accounting period, including assets, liabilities, and equity accounts.

Trial Balance

A financial worksheet that consolidates all ledger balances into equal debit and credit column totals.

Prepaid Items

This term describes expenses paid in advance for goods or services to be received in the future, such as insurance or rent.

Accrued Interest

The interest that has been earned but not yet paid, accumulating on loans or bonds over a period of time.