# Why Investors Demand Higher Expected Rates of Return on Stocks

Why do investors demand higher expected rates of return on stocks with more variable rates of return?

© BrainMass Inc. brainmass.com October 2, 2020, 2:13 am ad1c9bdddfhttps://brainmass.com/business/beta-and-required-return-of-a-project/investors-demand-higher-expected-rates-return-stocks-425631

#### Solution Preview

To answer this question, let's look at two stocks, A and B. A has an expected return of 10% and a volatility of 15%, while B has an expected return of 10% and a volatility of 25%. No investor will buy B, because he would be getting ...

#### Solution Summary

The solution discusses why investors demand higher expected rates of return on stocks.

$2.19