Question

the efficient market hypothesis suggests that the actual price of an asset equals its expected price. O below its expected price. O above its expected price. O its expected price plus a random error term.

Answer 1

1. The Efficient market hypothesis is aimed at advocating that asset price reflects all the information available and it's a fair market and all the news and new information have been already discounted in the price.

So in a efficient market, there is not any kind of room for beating the Market rate of return as actual price of the asset is equal to the expected price.

So Answer would be(A) actual price expected price. Rest of the optiona advocates differently so they aren't apt. .

2. In case of rise in supply of bonds, the equilibrium price will go down due to the economic theory of demand and supply as there are more number of sellers & buyers are not much so equilibrium price will fall.

As there is an increase in supply , Seller will be willing to sell cheap and there are less buyers and that will raise the equilibrium interest rate as they are trying to increase the flow of money.

So My answer would be

(C) Lowers the equilibrium price & increase the equilibrium interest rates.

Rest of the options advocates differently so wrong.