For a stock to be in equilibrium-that is,for there to be no long-term pressure for its price to change-the
A) expected future return must be less than the most recent past realized return.
B) past realized return must be equal to the expected return during the same period.
C) required return must equal the realized return in all periods.
D) expected return must be equal to both the required future return and the past realized return.
E) expected future return must be equal to the required return.

Question

Quizplus · Accepted Answer

For a stock to be in equilibrium, the expected future return must be equal to the required return, as this means there is no long-term pressure for the price to change. The other options either do not address the required return, or suggest a difference between past and future returns which would cause pressure for the price to change.

For a Stock to Be in Equilibrium-That Is,for There to Be