One Reason That the Required Rate of Return on Shares

question 2

Multiple Choice

One reason that the required rate of return on shares is generally more than on interest-yielding securities is because:

• A)borrowers may default on payments.
• B)the returns on shares are higher than on interest-yielding securities.
• C)debtholders rank ahead of shareholders in case of default.
• D)shareholders rank ahead of debtholders in case of default.

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Definitions:

Inborn Potential

The inherent capacity or natural ability present from birth that can develop into talents or skills with encouragement and practice.

Abraham Maslow

An American psychologist known for creating Maslow's hierarchy of needs, a theory of psychological health predicated on fulfilling innate human needs in priority, culminating in self-actualization.

Self-Actualization

The realization or fulfillment of one's talents and potentialities, considered as a drive or need present in everyone, the highest level in Maslow's hierarchy of needs.

Self-Actualization

The achievement of realizing one's abilities and possibilities, seen as an inherent motivation or necessity in all individuals.