If the Expected Rate of Return on a Stock Exceeds

question 3

Multiple Choice

If the expected rate of return on a stock exceeds the required rate,

• A) The stock is experiencing supernormal growth.
• B) The stock should be sold.
• C) The company is probably not trying to maximize price per share.
• D) The stock is a good buy.
• E) Dividends are not being declared.

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Definitions:

Nonrival Consumption

A characteristic of goods where one person's consumption does not reduce availability or enjoyment of the good for others.

Nonexcludable

A characteristic of a good whereby it is not possible to prevent individuals from consuming the good once it has been provided.

Radio Signal

An electronic transmission of electromagnetic waves that can carry audio, data, or video signals.

Marginal Cost

The charge for generating one more unit of a product or service.