Question
There are two common stocks in the market. Stock A is expected to provide 10 percent rate of return. Stock B is expected to provide
There are two common stocks in the market. Stock A is expected to provide 10 percent rate of return. Stock B is expected to provide 30 percent rate of return. Which of the following statements is true about this scenario?
Group of answer choices
This scenario is inconsistent with the efficient markets hypothesis. This is because, the difference in the two rates of return is too high to be justified under the hypothesis.
This scenario is consistent with the efficient markets hypothesis. This is because, all else the same, Stock B is probably more liquid.
This scenario is inconsistent with the efficient markets hypothesis. This is because, under this hypothesis these two rates would be equalized through arbitrage.
This scenario is consistent with the efficient markets hypothesis. This is because, all else the same, Stock B is probably less risky.
This scenario could be consistent with the efficient markets hypothesis, if Stock B is more risky than stock A, while all else is the same.
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