Holding everything else equal,if the expected return on My Company stock increases from 10% to 15% and the expected return on That Company stock increases from 10% to 12%,the demand for My Company stock
A)increases because the expected return has increased relative to the alternative asset.
B)decreases because it is riskier.
C)decreases because owners are now wealthier.
D)increases because the expected return of That Company stock increased.

Question

Quizplus · Accepted Answer

When the expected return on My Company stock increases and the expected return on That Company stock remains low, investors would now perceive My Company stock to be relatively more attractive, leading to an increase in demand for it. This is because investors would prefer to invest in an asset that offers higher expected returns if they are compensated for taking on additional risk.

Holding Everything Else Equal,if the Expected Return on My Company