What will happen if the current asset price is greater than the present value of income?
A)Sellers will lower the asset's price until it equals the present value of income.
B)Buyers will bid the asset's price down until it equals the discount rate.
C)Buyers will bid the asset's price down until it equals the present value of income.
D)Sellers will raise the asset's price until it equals the present value of income.

Question

Quizplus · Accepted Answer

The current asset price and the present value of income should be equal in an ideal scenario. If the current asset price is greater than the present value of income, buyers will start bidding the price down until it equals the present value of income. This is because buyers are rational and will not want to pay more for an asset than its actual value. Hence, Option C is the correct choice.

What Will Happen If the Current Asset Price Is Greater