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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