Suppose a Stock Has the Same Expected Rate of Return

question 49

Multiple Choice

Suppose a stock has the same expected rate of return as a bank account. Then

• A)individuals will choose indifferently between the stock and the bank account.
• B)there will be an excess supply of the stock and its price will fall.
• C)risk-averse individuals will prefer the stock.
• D)there will be an excess supply of the stock and its price will rise.
• E)there will be an excess demand for the stock and its price will rise.

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