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

question 112

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) 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) sell the asset, since price is expected to decrease.

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Definitions:

Valve Lash Adjustment

The process of setting the clearance between the valves and their respective lifters in an engine to ensure proper operation.

TDC Compression

Top Dead Center on the compression stroke; the point at which a piston is closest to the cylinder head, just before fuel ignition.

Blue Exhaust Smoke

Smoke with a blue tint emitted from a vehicle's exhaust, typically indicating oil burning in the combustion chamber.

Combustion Chamber

A section of an engine where fuel and air are burned to produce energy.