If one security has a greater risk than another security, how will investors respond? - 4565

Solution Posted by
UoPExpert

UoPExpert

Rating : (2)F
Solution Detail
Price: $1.30
  • From: ,
  • Posted on: Wed 28 Mar, 2012
  • Request id: None
  • Purchased: 0 time(s)
  • Average Rating: No rating
Request Description

 If one security has a greater risk than another security, how will investors respond?

a.They will require a lower rate of return for the investment that has greater risk.

b.They would be indifferent regarding their expectation of rates of return for either investment.

c.They will require a higher rate of return for the investment that has greater risk.

d.None of the above

The tenet, of both the efficient frontier, in portfolio analysis and the Capital assets pricing model, is that investors are rational and will only take more risk for more returns.  

 
Solution Description

.     If one security has a greater risk than another security, how will investors respond?

a.