If an Asset's Expected Return Is Less Than Its Required

question 5

Multiple Choice

If an asset's expected return is less than its required return,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:

Demand Curve

A chart that illustrates how the quantity of a product that consumers are ready to buy varies with its price.

Decrease in Demand

Refers to a situation where consumers' desire to purchase goods or services at a given price level decreases, leading to a leftward shift in the demand curve.

BCG Portfolio Planning Model

A strategic business tool developed by the Boston Consulting Group to help organizations prioritize their investments across different business units based on market growth and market share.

Market Growth Rate

A measure of the increase in the size or value of a market for a product or service over time.