For markets to be in equilibrium,that is,for there to be no strong pressure for prices to depart from their current levels,
A) The past realized rate of return must be equal to the expected future rate of return; that is, .
B) The required rate of return must equal the past realized rate of return; that is, r = .
C) The expected rate of return must be equal to the required rate of return; that is, = r.
D) All of the above statements must hold for equilibrium to exist; that is = r = .
E) None of the above statements is correct.

Question

Quizplus · Accepted Answer

For markets to be in equilibrium, the expected rate of return must be equal to the required rate of return. This means that investors are satisfied with the returns they are receiving and are not looking to buy or sell assets to try and achieve higher returns. The other statements are not necessarily true in all cases and may not be sufficient to determine equilibrium.

For Markets to Be in Equilibrium,that Is,for There to Be