In the Simple Model of Financial Asset Model Arbitrage, We

question 94

Multiple Choice

In the simple model of financial asset model arbitrage, we assume that:

• A) future markets are perfectly efficient.
• B) there is no uncertainty about stock prices.
• C) stock prices follow a random walk.
• D) the risk premium does not equal zero.
• E) capital gains are zero.

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Definitions:

Arousal

A state of heightened physiological activity or alertness, often driven by emotional, physical, or mental stimuli.

Sensory Systems

The parts of the body involved in the reception and processing of sensory information from the environment, enabling perception.

Colour-Blind

The inability to perceive differences between some of the colors that others can distinguish.

Vision

The ability to see or the faculty of sight; it can also refer to the capacity to envisage future developments and work towards them.