Start from a position of financial market equilibrium for the price of a companys stock. Evaluate the impact of the cited event on this initial equilibrium and determine the predicted impact on the intrinsic value and, in equilibrium, the actual stock price.

I. the expected rate of return is now higher than the required rate of return; or, equivalently, the required rate of return is now lower than the expected rate of return

II. the expected rate of return is now lower than the required rate of return; or, equivalently, the required rate of return is now higher than the expected rate of return

A. the companys stock price should increase to restore equilibrium

B. the companys stock price should decrease to restore equilibrium

(38) A reduction in the short term risk free interest rate engineered by the FED

(a) I and A (c) II and A

(b) I and B (d) II and B