James Is Willing to Settle for a 10% Rate of Return

question 38

Multiple Choice

James is willing to settle for a 10% rate of return on EG shares at a time when investors, on average, are requiring an 11% rate of return on the same shares. Which of the following will happen?

• A) James will be have to pay more for the shares than he was willing to pay.
• B) James will be happy to buy the shares for less than he was willing to pay.
• C) Investors with different required rates of return will pay different prices for the shares.
• D) James will not be able to buy the shares unless the price changes.

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