A Situation in Which All Investors Possess the Same Perceptions

question 34

Multiple Choice

A situation in which all investors possess the same perceptions with regard to the expected returns, standard deviations, and covariances of the securities is referred to as

• A) heterogeneous expectations
• B) nonsatiation
• C) homogeneous expectations
• D) rational expectations

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Definitions:

Borrowing Rate

The interest rate applied to loans and borrowings taken by a company or an individual.

Note Payable

A written promise to pay a certain amount of money, usually with interest, at a future date or over a period of time.

Market Interest Rate

The rate at which interest is paid by borrowers for borrowing funds in the market.

Compounded Annually

A method of calculating interest in which the interest earned each year is added to the principal, so that the balance doesn't merely grow, it grows at an increasing rate.