Suppose a Stock Has a Lower Expected Rate of Return

question 31

Multiple Choice

Suppose a stock has a lower expected rate of return than a bank account. Then

• A)there will be an excess supply of the stock and its price will rise.
• B)there will be an excess supply of the stock and its price will fall.
• C)there will be an excess demand for the stock and its price will rise.
• D)individuals will choose indifferently between the stock and the bank account.
• E)risk-averse individuals will prefer the stock.

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Definitions:

Fatigue

A state of tiredness or exhaustion resulting from physical or mental exertion, which can diminish capacity for work and efficiency.

Palpitations

The feeling that one's heart is beating too hard or too fast, skipping a beat, or fluttering.

Cholesterol

A lipid molecule synthesized in the liver or ingested from diet, essential for all animal life, but high levels are linked to cardiovascular diseases.

Waxy Substance

A general term for materials that are solid at room temperature and have a slippery or glossy texture; in biological contexts, it might refer to substances like cholesterol.