If a Stock's Expected Return as Seen by the Marginal

question 5

True/False

If a stock's expected return as seen by the marginal investor exceeds this investor's required return, then the investor will buy the stock until its price has risen enough to bring the expected return down to equal the required return.

---

Definitions:

Time Value of Money

The concept that money available at the present time is worth more than the same amount in the future due to its potential earning capacity.

Face Value

The original value of a financial instrument as stated on the instrument itself.

Compounded Annually

Interest calculation method where the interest amount is added to the principal at the end of each year, and the total becomes the principal for the next year.

Annual Deposits

Regular sums of money deposited into an account or investment annually.