Suppose there is a reduction of the return provided on U.S.Treasury bonds.We should expect the current price of stocks to:
A) Increase since the risk-free return is now lower.
B) Decrease since U.S.Treasury bonds are safer.
C) Increase since the risk premium on the stocks will increase.
D) Stay the same; there is no effect on stock prices from this reduction.
Correct Answer:
Verified
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