An Investor Is Faced with the Decision of Whether to Invest

question 34

Multiple Choice

An investor is faced with the decision of whether to invest in a stock with an expected return of 14% or a stock in the same industry with an expected 20% return.Which of the following seems most likely?

• A) The 20% stock is a better investment.
• B) The 14% stock is overpriced.
• C) Both stocks will have approximately the same return.
• D) Both stocks are priced correctly given their perceived risk.

---

Definitions:

New York Federal Reserve Bank

A regional bank part of the Federal Reserve System, playing a key role in monitoring and executing monetary policy in the United States.