Question

If a given investor believes that a stock’s expected return exceeds its required return, then the investor most likely believes that
a. the stock should be sold.
b. the stock is experiencing supernormal growth.
c. management is probably not trying to maximize the price per share.
d. the stock is a good buy.
e. dividends are not likely to be declared.

Answer 1

Answer:

d

Explanation:

The answer is d because if the investor is expecting the returns to be higher than his required return this means that the stock is under-valued i.e. it is available at a price lower than its actual worth considering the pay-off expected in the future.  Therefore the stock is worth buying now.