You originally required a risk premium of 6 percent in addition to the rate of return on safe assets before you would purchase shares of Techno Company stock. If you and other investors reduce the risk premium you require to 4 percent, the price of Techno Company stock will:
A. decrease.
B. equal the new risk premium plus the rate of return on safe assets.
C. increase.
D. equal the old risk premium plus the new risk premium.
Answer: C
You might also like to view...
"Any tax cut to increase demand for output should favor lower-income people" is a ________ statement about ________ policy.
A. normative; fiscal B. positive; monetary C. normative; monetary D. positive; fiscal
If an individual deposits an amount at a compound interest rate of r% per year for a time period of T years, then:
A) Future Value = (1 - r)T × (Original Principal). B) Future Value = (1 + r)/T × (Original Principal). C) Future Value = (1 - r)/T × (Original Principal). D) Future Value = (1 + r)T × (Original Principal).
For a perfectly competitive firm, the value of marginal product diminishes as employment increases because the
A) price falls as the firm's production increases. B) marginal revenue decreases as the firm's production increases. C) marginal product decreases as the firm's production increases. D) None of the above answers is correct.
A decrease in costs may not increase economic profit
Indicate whether the statement is true or false