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. equal the old risk premium plus the new risk premium.
B. equal the new risk premium plus the rate of return on safe assets.
C. increase.
D. decrease.
Answer: C
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In trying to make a profit maximizing decision, managers are concerned about both supply and demand. Which of the following factors affect demand specifically? (select all that apply)
A. Income B. cost of production C. Consumers' tastes D. Price of related goods
An increase in productivity will cause which of the following according to the price-setting behavior of firms?
A) a reduction in prices set by firms B) an increase in the real wage paid by firms C) a reduction in the markup set by firms D) all of the above E) none of the above
Which of the following statements about implicit costs is true?
A. They measure the forgone opportunities of the firm's owners. B. They do not enter into the calculation of economic profit. C. They are always fixed. D. They exceed explicit costs.
Import tariffs generally result in
A) higher domestic prices. B) less consumer surplus. C) more producer surplus for domestic producers. D) a deadweight loss. E) all of the above