Investors demand higher returns on stock investments when:

Question

Quizplus · Accepted Answer

When interest rates increase, investors have more attractive options to invest their money, which makes them demand higher returns on stocks to compensate for the increased risk. This is known as the opportunity cost of investing in stocks. The other options, low inflationary pressures and changes in the pure rate of interest, do not necessarily affect the demand for higher returns on stock investments.

Investors Demand Higher Returns on Stock Investments When