Assume That There Are Two Investments Similar in All Respects

question 317

Multiple Choice

Assume that there are two investments similar in all respects, but Investment X has a higher rate of return than does Investment Y. As a result of the arbitrage process, the price of Investment

• A) X will fall and its rate of return will fall.
• B) Y will rise and its rate of return will fall.
• C) X will fall and its rate of return will rise.
• D) Y will fall and its rate of return will rise.

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Definitions:

Satisfier Factor

An aspect of work that can cause satisfaction if present, based on Herzberg's two-factor theory of motivation.

ERG Theory

A motivation theory developed by Clayton Alderfer that categorizes human needs into three groups: Existence, Relatedness, and Growth.

Physiological Well-Being

A state of physical health and functioning that allows an individual to perform daily activities without limitations or distress.

Maslow's Hierarchy

A theory of psychological motivation based on a hierarchy of needs, from basic survival needs to self-actualization.