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:

Cash Offer

A proposal to buy assets or securities for cash, rather than through the exchange of shares or other forms of compensation.

Rights Equivalent

A representation of the number of rights needed to buy one share at a discounted price during a rights issue, reflecting the value of these rights.

Subscription Price

The set price at which investors can buy shares of a stock or fund before they are offered to the public.

Market Price

This is the current price at which an asset or service can be bought or sold.