34. An asset sells for price Po= $190 today, and people expect to be able to sell them for P₁ = $210 next year. a. What is the (expected) rate of return on this asset? b. If the interest rate in the economy is i=5%, what do you expect to happen to the asset price Po? Explain. What should be the market equilibrium price Po?

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Market Efficiency

Market efficiency refers to the market's ability to provide investors with all available information about investment options for buying and selling securities. Market efficiency reflects the true value of securities without undervaluing or overvaluing them. When the quality and quantity of information increase, the market becomes more efficient, allowing it to reduce arbitrage and obtain higher market returns from investment. In a well-functioning market, everyone receives all information completely and immediately at no cost. It opens up a plethora of opportunities for investors to access various investment options.