If asset A is a risky asset yielding 10 percent and asset B is a riskless asset with the same maturity with a yield of 8 percent, investors would
A) prefer asset A.
B) prefer asset B.
C) be indifferent between the two assets.
D) None of the above.
D
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A bank failure occurs whenever
A) a bank cannot satisfy its obligations to pay its depositors and other creditors. B) a bank suffers a large deposit outflow. C) a bank has to call in a large volume of loans. D) a bank refuses to make new loans.
If market participants have rational expectations,
A) they can assume the stock prices they observe represent the fundamental values of those stocks B) they know to purchase stocks that are priced below their fundamental value C) they will achieve higher returns than those with adaptive expectations D) they can earn above-average returns on their investments
An increase in the spending multiplier causes the IS curve to
A. become flatter. B. shift to the left. C. become steeper. D. shift temporarily to having a positive slope.
The principle of comparative advantage essentially states that
A) there are some goods for which the opportunity costs of production are the same regardless of who produces them. B) some goods have high opportunity costs and low absolute costs. C) specialization can reduce output rather than increase it. D) total output of an economic system is greatest when each good is produced by those who have the lowest opportunity cost of producing the good.