Suppose a Stock Has a Lower Expected Rate of Return

question 31

Multiple Choice

Suppose a stock has a lower expected rate of return than a bank account. Then

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

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Definitions:

Over-Reward Inequity

Occurs when an individual perceives that they are receiving more rewards (pay, recognition, benefits) in comparison to others for the same amount of effort or contribution.

Outcomes-To-Inputs Ratio

A principle in equity theory that compares the rewards (outcomes) one receives from a job relative to the effort (inputs) one has invested.

Sensitives

Individuals or entities that are highly responsive or susceptible to external stimuli or changes in their environment.

Entitleds

Individuals who believe they deserve special treatment or privileges, regardless of their actual accomplishments or contributions.