Question 1
If you own a share of stock in a company and the risk associated with its business rises you would expect
◦ a capital gain.
◦ a capital loss.
◦ a higher dividend.
◦ a bubble.
Question 2
Rising stock prices increase investment because
◦ the rising prices increase firm profits and make investment out of retained earnings easier.
◦ firms can raise more money per share of stock sold.
◦ rising stock prices guarantee an increased level of retained earnings.
◦ interest rates are lower.