The Idea That Investors in Common Stock May Expect a Lower

question 9

Multiple Choice

The idea that investors in common stock may expect a lower total return when prices are relatively stable suggests that:

• A) investors are irrational.
• B) risk premiums may have a normal magnitude.
• C) real rates of return will be lower during periods of price stability.
• D) stocks should be avoided when inflation is low.

---

Definitions:

Economic Impact

The effect of an event, policy, or market condition on the economy of a region or country, often measured in terms of changes in GDP, employment, or income.

Civil War

A conflict between citizens of the same country. In the United States, it refers specifically to the war fought from 1861 to 1865 between the North and South over issues including states' rights and slavery.

Northern Society

An association or community located in the northern part of a country or region, often distinct in its cultural, economic, or social characteristics when contrasted with southern counterparts.

State Sovereignty

The principle that the state has the authority to govern itself without external interference, holding supreme power over its territory and population.