If the optimal forecast of the return on a security exceeds the equilibrium return, then .A. the market is inefficient. B. an unexploited profit opportunity exists. C. the market is in equilibrium. D. only A and B of the above are true. E. only B and C of the above are true.

D. only A and B of the above are true.

Explanation:

In simple words, this question is asking why the optimal return or best possible return of an investment is actually higher than the real market return. Generally this can be explained by opportunity costs and profits, or maybe even market inefficiencies caused by external factors (e.g. taxes).

In economics, efficient companies operating in competitive markets will always have 0 economic profit in the long run, that means that the company has maximized its accounting profits and there is no other alternative investment that can provide the same returns.

The same concept applies here, when you maximize your potential returns, it means that there is no other security or investment should yield the same returns. If your returns are actually, it only means that you are missing an opportunity profit (by investing in some other security) or some type of market inefficiency or external factor has decreased the actual return of your investment.

cognitive overload: having a lot on your mind impairs decision-making and tends to result in the simplest, but not necessarily best, option being selected.

empathy gaps: overlooking how you might feel in a different situation can result in unnecessary purchases, such as overbuying when shopping for food on an empty stomach.

optimism and overconfidence: wearing rose-tinted glasses and having unrealistic expectations about the future can affect money management and leave you unprepared for a change in circumstance.

instant gratification: seeking instant gratification drives impulsive spending and can undermine long-term planning and savings.

harmful habits: automatic or mindless behaviour can amplify a poor financial decision as it becomes a recurring event.

social norms: we are heavily influenced by the actions of others; while this can be in certain circumstances, it also contributes to the pressure to keep up with the joneses through conspicuous consumption.

c

explanation:

well obviously you must be dumb if you dont noe dat