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:

Agriculture

The practice of cultivating soil, growing crops, and raising livestock for food, fiber, medicinal plants, or other products used to sustain and enhance human life.

Law of Diminishing Returns

An economic principle stating that adding more of one factor of production, holding all else constant, will at some point yield lower per-unit returns.

Dramatic Yields

Significant increases in productivity, often used in the context of agricultural output resulting from new technologies or methods.

Pesticides

Chemicals used to kill or manage the population of pests, including insects, weeds, and fungi, that threaten agricultural production and public health.