Increased uncertainty resulting from the global financial crisis ________ the requiredreturn on investment in equity.A) raisedB) loweredC) had no impact onD) decreased
Question
Increased uncertainty resulting from the global financial crisis ________ the requiredreturn on investment in equity.A) raisedB) loweredC) had no impact onD) decreased
Solution
The correct answer is A) raised.
Here's why:
- The global financial crisis increased uncertainty in the market.
- This uncertainty means that there is a higher risk associated with investments, as the outcomes are less predictable.
- In order to compensate for this increased risk, investors require a higher return on their investments. This is because they want to ensure that they are adequately compensated for the risk they are taking on.
- Therefore, the required return on investment in equity would have been raised.
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