If the Expected Return Is Above the Required Return on an Asset

question 27

Multiple Choice

If the expected return is above the required return on an asset, rational investors will

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

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Definitions:

Accurate To Cent

A measurement precise to the nearest hundredth of a currency unit.

Solve For X

A mathematical expression used to find the value of an unknown variable.

Five-Figure Accuracy

Five-figure accuracy refers to precision up to five significant digits in a numerical measurement or calculation.

Solve For X

A directive in mathematics and algebra to find the value of the variable x.