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 rate of return;that is, .
B) The required rate of return must equal the realized rate of return;that is,r = .
C) All companies must pay dividends.
D) No companies can be in danger of declaring bankruptcy.
E) The expected rate of return must be equal to the required rate of return;that is, = r.

Question

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 rate of return;that is, . 
B) The required rate of return must equal the realized rate of return;that is,r = . 
C) All companies must pay dividends. 
D) No companies can be in danger of declaring bankruptcy. 
E) The expected rate of return must be equal to the required rate of return;that is, = r.

Quizplus · Accepted Answer

In order 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 there is no pressure for prices to increase or decrease. Choices A, B, C, and D do not necessarily guarantee equilibrium in the market.

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