Which of the following statements is true?
A)Asset prices and average expected rates of return are directly related, but levels of nondiversifiable risk and average expected rates of return are inversely related.
B)Asset prices and average expected rates of return are inversely related, but levels of nondiversifiable risk and average expected rates of return are directly related.
C)Asset prices, average expected rates of return, and levels of nondiversifiable risk are all directly related.
D)Average expected rates of return are inversely related to both asset prices and levels of nondiversifiable risk.

Question

Quizplus · Accepted Answer

Asset prices and average expected rates of return are inversely related because higher prices typically mean lower returns. Levels of nondiversifiable risk and average expected rates of return are directly related because higher risk demands higher returns.

Which of the Following Statements Is True