If One Security Has a Greater Risk Than Another Security

question 10

Multiple Choice

If one security has a greater risk than another security, how will investors respond?

• A) They will require a lower rate of return for the investment that has greater risk.
• B) They would be indifferent regarding their expectation of rates of return for either investment.
• C) They will require a higher rate of return for the investment that has greater risk.
• D) None of the above.

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Definitions:

Elicit Salivation

Stimulating the production of saliva through various means, commonly associated with conditioned responses in classical conditioning experiments.

Pairing

The process of associating two events or stimuli together, often used in conditioning wherein a neutral stimulus becomes associated with a meaningful one.

Generalization

The process of applying the outcomes of specific instances to broader situations or populations, often seen in learning and reasoning.

Conditioned Response

A learned response to a previously neutral stimulus that has become associated with an unconditioned stimulus through conditioning.