If markets are in equilibrium, which of the following conditions will exist? A)

Question

If markets are in equilibrium, which of the following conditions will exist?
A) Each stock's expected return should equal its realized return as seen by the marginal investor.
B) Each stock's expected return should equal its required return as seen by the marginal investor.
C) All stocks should have the same expected return as seen by the marginal investor.
D) The expected and required returns on stocks and bonds should be equal.
E) All stocks should have the same realized return during the coming year.



The preemptive right is important to shareholders because it...
A) allows managers to buy additional shares below the current market price.
B) will result in higher dividends per share.
C) is included in every corporate charter.
D) protects the current shareholders against a dilution of their ownership interests.
E) protects bondholders, and thus enables the firm to issue debt with a relatively low interest rate

Explanation / Answer

B) Each stock's expected return should equal its required return as seen by the marginal investor. =========================== D) protects the current shareholders against a dilution of their ownership interests.

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