Suppose There Is a Reduction of the Return Provided on U.S

question 6

Multiple Choice

Suppose there is a reduction of the return provided on U.S. Treasury bonds. We should expect the current price of stocks to: $\mathrm{P}_{\text {today }}=\frac{\mathrm{D}_{\text {today }}(1+g) }{r f+r p-g}$

• A) increase since the risk-free return is now lower.
• B) decrease since U.S. Treasury bonds are safer.
• C) increase since the risk premium on the stocks will increase.
• D) stay the same; there is no effect on stock prices from this reduction.

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Definitions:

Attitudes

Psychological tendencies expressed by evaluating a particular entity with some degree of favor or disfavor.

Situational Constraints

External conditions or circumstances that limit or influence someone's actions or behavior.

Thoughtful Deliberation

The process of carefully considering and discussing issues before making decisions, reflecting a mindful and considerate approach.

Cognitive Component

The aspect of attitudes or beliefs that involves knowledge, thoughts, and beliefs about objects, people, or situations.