Question

Investor Lucas just bought a large amount of stock in Company Y. What may have motivated his behavior? (5 points)

Lower shares prices
O Low real returns

O Higher shares costs

O High total ear

Answer 1

What must have motivated the behavior of the Investor to commit to such a large stock is; Option C: High Total Earnings

How to know the value of investing in stocks?

A) Low real returns; This cannot be his motivation to buy large shares because real return is what is earned on an investment after accounting for taxes and inflation. Thus, the lower, the less encouraging to investors.

B) Higher shares costs; This only means that the share cost is currently high which indicates strength of the company but it does not guarantee that it will scale up at a very fast rate again.

C) High total earnings; Thus would be an encouragement to the investor because the higher the total earning potential of an investment, the more the profitability and the more attractive to others.

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