Question 11

Arbitrage is based on the idea that _________.

		In the equilibrium, securities with similar risk should sell at different prices
		market price is always right at any point in time, therefore leaving arbitrageurs no opportunities to explore
		the expected returns from equally risky assets are different
		In the equilibrium, assets with identical risks should earn the same expected rate of return

Question 12

Your two best friends each tell you about a person they know who successfully started a small business. That's it, you decide; if they can do it, so can you. This is an example of _____________.

		framing bias
		conservatism
		mental accounting
		small sample bias or representativeness