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Brief Principles of Macroeconomics...

8th Edition
N. Gregory Mankiw
ISBN: 9781337091985

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BuyFindarrow_forward

Brief Principles of Macroeconomics...

8th Edition
N. Gregory Mankiw
ISBN: 9781337091985
Textbook Problem

Which kind of stock would you expect to pay the higher average return: stock in an industry that is very sensitive to economic conditions (such as an automaker) or stock in an industry that is relatively insensitive to economic conditions (such as a water company)? Why?

To determine

Selection of stocks.

Explanation

The stock in an industry that is very sensitive to economic conditions has more risk than the stock in an industry that is relatively insensitive to economic conditions. There is a positive relationship between risk and return, the stock that has high risk gives a higher return...

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