What Can Be Expected to Happen When Stocks Having the Same

question 32

Multiple Choice

What can be expected to happen when stocks having the same expected risk do not have the same expected return?

• A) at least one of the stocks becomes temporarily mispriced
• B) this is a common occurrence indicating that one stock has more PVGO
• C) this cannot happen if the shares are traded in an auction market
• D) the expected risk levels will change until the expected returns are equal

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Definitions:

Rate of Return

An investment's performance, marked by gains or losses during a defined period, articulated as a percentage of its beginning cost.

Compounded Semi-annually

This refers to the process of calculating interest on a principal amount at two intervals in a year, effectively increasing the amount of interest earned or paid.

Consolidated Amount

The consolidated amount represents the total figure that combines multiple accounts, funds, or financial statements, providing an overall picture.

Time Value

The concept that money available at the present time is worth more than the same amount in the future due to its potential earning capacity.