Suppose a Stock Has the Same Expected Rate of Return

question 15

Multiple Choice

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

• A)rise and the expected rate of return will decrease.
• B)fall and the interest rate will decrease.
• C)rise and the expected rate of return will increase.
• D)fall and the expected rate of return will increase.
• E)fall and the expected rate of return will decrease.

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Definitions:

Maslow's Hierarchy

A theory in psychology proposed by Abraham Maslow, which outlines a five-tier model of human needs, from basic physiological needs to self-actualization.

Postpurchase Cognitive Dissonance

The psychologically uncomfortable state produced by an inconsistency between beliefs and behaviors that in turn evokes a motivation to reduce the dissonance; buyers’ remorse.

Expensive Pair

Products or items that are costly and often bought together, typically offering complementary benefits or satisfying related needs.

Evoked Set

Comprises the alternative brands or stores that the consumer states he or she would consider when making a purchase decision.