Suppose an Investor Is Considering One of Two Investments That

question 22

Multiple Choice

Suppose an investor is considering one of two investments that are identical in all respects except for risk. If the investor anticipates a fair return for the risk of the security he invests in, he can expect to ________.

• A) earn no more than the Treasury-bill rate on either security.
• B) pay less for the security that has higher risk.
• C) pay less for the security that has lower risk.
• D) earn more if interest rates are lower.

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Definitions:

Hypothesis

A proposed explanation for a phenomenon, set forth as a starting point for further investigation.

Biographical Anonymity

Ensuring that individuals' identities are not disclosed in research findings, protecting their privacy and confidentiality.

Laud Humphreys

An American sociologist known for his research into sexual behavior and for his controversial study of anonymous male homosexual acts in public places.

Ethical

Pertaining to or dealing with morals or the principles of morality; concerning right and wrong behavior.