Why do investors demand a higher return when investing in riskier securities?

Question:

Fantastic news! We've Found the answer you've been seeking!

Step by Step Answer:

Related Book For book-img-for-question

Fundamentals of Corporate Finance

ISBN: 978-0321818171

2nd Canadian edition

Authors: Jonathan Berk, Peter DeMarzo, Jarrad Harford

See More Books

Question Posted: Jan 05, 2019 12:46 PM

See More Questions

What would be the effect of the following changes on the market price of a company's stock, all other things the same? a. Investors demand a higher required rate of return for stocks in general. b....
Explain why mortgage investors demand a higher yield for investing in securities with call risk and extension risk. Why would a mortgage investor view mortgage prepayments negatively?
Do you believe that Bernard Madoff worked alone, or do you think he had help in creating and sustaining his Ponzi scheme? Would this represent a conflict of interest? The fraud perpetrated by Bernard...
A horizontal cross section of a concrete bridge pier is a regular hexagon (six sides, all equal in length, and all internal angles are equal), each side of which is 2.50 m long. If the height of the...
Here are the post-closing trial balances of two proprietorships on January 1 of the current year: Visanji and Vanbakel decide to form the Varsity partnership and agree on the following fair values...
Why should a manager be suspicious if a forecaster claims to forecast historical demand without any forecast error?
AFN EQUATION Carter Corporations sales are expected to increase from $5 million in 2014 to $6 million in 2015, or by 20%. Its assets totaled $3 million at the end of 2014. Carter is at full capacity,...
In July of 2011, Sue enters into a forward agreement with Ann to lock in a sales price for wheat. Sue anticipates selling 300,000 bushels of wheat at the market in March of 2012. Ann agrees to a...
A farm has produced fruit for more than two decades and sells it to supermarkets. This business leaves a net margin of around 0.27. In 2021, the owner began to produce and market natural smoothies...
oms Trailers Ltd. (TTL), located in London, Ontario, manufactures industrial trailers that are used to ship goods across the country. Originally, Tom Tran owned 60 percent of the common shares of TTL...
How does the relationship between the average return and the historical volatility of individual stocks differ from the relationship between the average return and the historical volatility of large,...
What are the components of a stocks realized return?
How many molecules of each substance are involved in the equation in Exercise 1 if it is interpreted in terms of moles?
Listed in the accompanying table are waiting times (seconds) of observed cars at a Delaware inspection station. The data from two waiting lines are real observations, and the data from the sir line...
Franklin Prepared Foods (FPF) sells three varieties of microwaveable meals with the following prices and costs: Variable Cost Fixed Cost per Meat Fish Vegetarian Entire firm Selling Price per Case: $...
Isabella is a 14-year-old Hispanic bisexual female who has come into the Department of Child Safety (DCS) care due to neglect. Isabella's mother, Martina, is 35 years old, a single mother, has an...
Jeff is able to ride a bicycle although he hasn't ridden one for a few years, thanks to his: ( A ) procedural memory ( B ) episodic memory C ) semantic memory ( D ) cognitive memory
1. Allen Young has always been proud of his personal investment strategies and has done very well over the past several years. He invests primarily in the stock market. Over the past several months,...
Each of the six numbered regions in Fig. 19.10 corresponds to a certain type of a ring. Give an example of a ring in each of the six cells. For example, a ring in the region numbered 3 must be...
The manager of a local convenience store is expanding his line of small toy items. To price these new items, the manager is looking at the prices being charged by competing retailers in his area. For...
What are the main differences between a firm commitment IPO and an auction IPO?
How is the price set in an auction IPO?
Why should a financial manager be concerned about under pricing?
Strawberry Inc. has historically been an all-equity firm. The analyst expects EBIT to be $1.5B in perpetuity starting one year from now. The cost of equity for the company is 11.5% and the tax rate...
Guzman company received a 60- day, 5 % note for 54,000 dated July 12 from a customer on account. Determine the due date on note. Determine the maturity value of the note and journalize the entry of...
Jeannie is an adjunct faculty at a local college, where she earned $680.00 during the most recent semimonthly pay period. Her prior year-to-date pay is $18,540. She is single and has one withholding...

Why do investors demand a higher return when investing in riskier securities?

Question:

Step by Step Answer:

We have established the ...View the full answer

Fundamentals of Corporate Finance

Students also viewed these Business questions