Everything Else Held Constant,if the Expected Return on ABC Stock

question 83

Multiple Choice

Everything else held constant,if the expected return on ABC stock rises from 5 to 10 percent and the expected return on CBS stock is unchanged,then the expected return of holding CBS stock ________ relative to ABC stock and the demand for CBS stock ________.

• A) rises; rises
• B) rises; falls
• C) falls; rises
• D) falls; falls

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Definitions:

Exchange Rates

The rate at which one currency can be converted into another.

Bretton Woods

Bretton Woods refers to the 1944 international agreement that established fixed foreign exchange rates for major currencies, thereby creating a framework for international trade and financial relations.

World War II

A worldwide war that occurred between 1939 and 1945, engaging the majority of the world's countries, including all major powers, which eventually split into two conflicting military coalitions: the Axis and the Allies.

Exchange Rates

The value of one currency for the purpose of conversion to another, determining how much of one currency can be exchanged for another currency.