James Is Willing to Settle for a 10% Rate of Return

question 13

Multiple Choice

James is willing to settle for a 10% rate of return on EG stock at a time when investors, on average, are requiring an 11% rate of return on the same stock.Which of the following will happen?

• A)James will be have to pay more for the stock than he was willing to pay.
• B)Investors with different required rates of return will pay different prices for the stock.
• C)James will not be able to buy the stock unless the price changes.
• D)James will be happy to buy the stock for less than he was willing to pay.

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Definitions:

Carbohydrate

Compound containing carbon, hydrogen, and oxygen, in the approximate ratio of C:2H:O (e.g., sugars, starch, and cellulose).

Lipid

A group of naturally occurring molecules that include fats, waxes, sterols, fat-soluble vitamins (such as vitamins A, D, E, and K), monoglycerides, diglycerides, triglycerides, phospholipids, and others.

Protein

A large, complex organic compound composed of covalently linked amino acid subunits; contains carbon, hydrogen, oxygen, nitrogen, and sulfur.

Cholesterol

A waxy type of lipid that is essential for the formation of cell membranes, certain hormones, and vitamin D, but high levels can lead to health issues.