If Expected Return Is Less Than Required Return on an Asset

question 21

Multiple Choice

If expected return is less than required return on an asset, rational investors will

• A) buy the asset, since price is expected to increase.
• B) sell the asset, which will drive the price up and cause the expected return to reach the level of the required return.
• C) sell the asset, which will drive the price down and cause the expected return to reach the level of the required return.
• D) buy the asset, which will drive the price up and cause expected return to reach the level of the required return.

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Definitions:

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Role Expectations

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