Which of the Following Statements Concerning the Required Rate of Return

question 81

Multiple Choice

Which of the following statements concerning the required rate of return on stocks is true?

• A) The higher an investor's required rate of return, the higher the value of the stock.
• B) If risk is reduced, the required return will decrease because more investors are risk-averse.
• C) The required return on preferred stock is generally higher than the required return on common stock.
• D) The higher the risk, the higher the required return, other things being equal.

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Definitions:

Expected Rate Of Return

The anticipated amount of profit or loss an investment is projected to generate based on historical or estimated future performance data.

Inflation Rate

The rate at which the general level of prices for goods and services is rising, subsequently eroding purchasing power.

Standard Deviation

A measure of the amount of variation or dispersion of a set of values, indicating how much the individual values in a data set differ from the mean.

Standard Deviation

Standard deviation is a statistical measure of the dispersion or variability of a set of data points around the mean.