From a strictly rational standpoint,the price at which a stock was purchased should be regarded as:
A)A reference point for judging gains and losses.
B)An indication of the stock's past performance
C)A helpful guide to avoid impatient trading of the stock.
D)Arbitrary and meaningless.

Question

Quizplus · Accepted Answer

From a strictly rational standpoint, the price at which a stock was purchased (its historical cost) should not influence its current valuation or future investment decisions. This concept is rooted in the efficient market hypothesis and the principle that the market price of a stock reflects all currently available information. Therefore, the purchase price is arbitrary and meaningless for future decisions, as it does not provide any insight into the stock's future performance or its current value.

From a Strictly Rational Standpoint,the Price at Which a Stock