If the Expected Return Is Above the Required Return on an Asset

question 16

Multiple Choice

If the expected return is above the required return on an asset, rational investors will ________.

• A) buy the asset, which will drive the price up and cause expected return to reach the level of the required return
• B) buy the asset, which will drive the price down and cause the expected return to reach the level of the required return
• C) sell the asset, which will drive the price up and cause the expected return to reach the level of the required return
• D) sell the asset, since price is expected to decrease

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Definitions:

Rational-Emotive

A form of psychotherapy that identifies irrational beliefs, challenges them, and encourages the adoption of more rational and self-helping thoughts.

Repressed Material

Thoughts, memories, or impulses that are pushed out of conscious awareness due to being considered psychologically threatening or unacceptable.

Positive Transference

In psychotherapy, it describes the phenomenon where a patient projects favorable emotions towards the therapist, often mirroring feelings associated with other relationships.

Unconditional Positive Regard

Unqualified caring and nonjudgmental acceptance of another.