When investors increase their required rate of return, the cost of capital increases simultaneously.

Question

Quizplus · Accepted Answer

When investors increase their required rate of return, it means they demand a higher return on their investment to compensate for the increased risk. This increase in required return leads to a higher cost of capital for the company as it becomes more expensive to raise funds from investors. Therefore, the statement is true.

When Investors Increase Their Required Rate of Return, the Cost