When Investors Become Irrationally Optimistic That an Asset's Price Will

question 35

Multiple Choice

When investors become irrationally optimistic that an asset's price will continue to rise, it causes a financial bubble to:

• A) start to inflate.
• B) be on the verge of bursting.
• C) burst.
• D) become doubted by most serious investors.

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Definitions:

Board of Directors

A group of individuals elected by shareholders responsible for overseeing the activities and strategic direction of a company.

Cumulative Preferred Stock

A type of preferred stock that accrues dividends if not paid out in the year they are due, ensuring investors receive dividends before common shareholders.

Dividends Payable

A liability representing the amount of dividends declared by a company's board of directors that have not yet been paid to shareholders.

Cash Dividend

A cash disbursement from a corporation to its shareholders, derived from its earnings.