For markets to be in equilibrium, that is, for there to be no strong pressure for prices to depart from their current levels,

Question

Quizplus · Accepted Answer

A is the only statement that accurately describes the required conditions for market equilibrium. The expected rate of return must be equal to the required rate of return in order for investors to be satisfied and not pushed to buy or sell, causing price pressure. The past realized rate of return may have some influence on expectations, but it is not a direct determinant of market equilibrium. The realized rate of return may deviate from the expected rate of return temporarily, but if the expected rate of return is still equal to the required rate of return, then the market will eventually adjust back to equilibrium. Therefore, D is not a correct statement, as it includes the incorrect statements B and C.

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