If Expected Return Is Less Than Required Return on an Asset

question 6

Multiple Choice

If expected return is less than 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) sell 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) buy the asset, since price is expected to increase

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Definitions:

Natural Resource

Materials or substances such as minerals, forests, water, and fertile land that occur in nature and can be used for economic gain.