If the demand for an asset increases, its price will
A) increase and the rate of return for new investors of this asset will increase.
B) decrease and the rate of return for new investors of this asset will increase.
C) decrease and the rate of return for new investors of this asset will decrease.
D) increase and the rate of return for new investors of this asset will decrease.

Question

Quizplus · Accepted Answer

When the demand for an asset increases, its price typically increases due to the higher competition to acquire it. However, for new investors buying at this higher price, the future rate of return is likely to decrease because they are purchasing the asset at a higher initial cost, which can limit the potential for price appreciation and the yield on investment relative to the purchase price.

If the Demand for an Asset Increases, Its Price Will