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Question

Suppose an investor bought stock in a company that is in danger of going out of business in

a year What would the rate of return be if the company did not fail?

• It would remain the same

• It would be low.

O Arwould be high.

• It would be negative

Answer

It would be high.

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If the company is in danger of going out of business, the stock price would likely be very low. If the company does not fail and manages...