# 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?

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#### 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.

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