Suppose a stock has the same expected rate of return as a bank account. Then the price of the stock will

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Quizplus · Accepted Answer

The price of a stock and its expected rate of return are inversely related. If a stock has the same expected rate of return as a bank account, investors might view it as less attractive due to higher risk compared to a bank account, leading to a decrease in demand and a fall in price. As the price falls, the expected rate of return increases because the future cash flows from the stock become more valuable relative to the lower price.

Suppose a Stock Has the Same Expected Rate of Return