You would want to purchase a security if P ____________ PV or Err ____________ rrr.

Question

Quizplus · Accepted Answer

The equation P ≥ PV means that the current market price of the security (P) is greater than or equal to its present value (PV). This suggests that the security is currently undervalued, and is likely to rise in price in the future.

The equation Err ≥ rrr means that the expected rate of return (Err) on the security is greater than or equal to the required rate of return (rrr). This suggests that the security is expected to provide a good return relative to the amount of risk involved.

Therefore, you would want to purchase a security if either P ≥ PV or Err ≥ rrr. Only choice C includes both of these conditions, making it the best answer.

You Would Want to Purchase a Security If P ____________ ≥\ge≥

You Would Want to Purchase a Security If P ____________ $\ge$