Question

If traders in a market have rational​ expectations, then A. prices of riskier assets are higher than prices of less risky assets. B. the price of an asset equals its fundamental value. C. past prices of assets do not affect market​ participants' expectations of future asset prices. D. they make use of less information than they would if they had adaptive expectations.

Answer 1

B. the price of an asset equals its fundamental value.

Step-by-step explanation:

• If the traders in the market have a rational expectation then the price of the asset is equal to the fundamental values and if a stocks is trading at a price at its fundamental values then the investor will be making a rational expectation.