If investors started to prefer investing in more ethical companies, then it would be expected that the stock prices for those companies would
A) increase, and the rates of return would decrease relative to other companies.
B) increase, and the rates of return would increase relative to other companies.
C) increase, but the rates of return would stay the same relative to other companies.
D) decrease, and the rates of return would decrease relative to other companies.

Question

Quizplus · Accepted Answer

When investors prefer investing in more ethical companies, demand for those companies' stocks increases, driving up their stock prices. As prices increase, the yield (rate of return) for new investors decreases relative to other companies, assuming the dividends or earnings growth do not increase at the same pace as the stock price.

If Investors Started to Prefer Investing in More Ethical Companies