Question 20 3 pts Application: Given the headline below, would this likely cause

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Question 20 3 pts Application: Given the headline below, would this likely cause an increase, or decrease, in the price of Peet's Coffee (from the previous problem)? North Korea test-fires what could be new kind of longer-range missile Unidentified missile type could have a maximum theoretical range of 4,500km on a standard trajectory, says expert North Koreans wave national flags and artificial flowers while marching alongside a float carrying models of different missiles. Photograph: Wong Maye-E/AP An increase because heightened risk of nuclear war means investors will likely get higher returns, which leads to a higher expected return and a higher stock price An increase because the heightened risk of nuclear war means potential investors will want to be compensated for the higher risk with a higher return, which can happen from paying more for a stock (i.e., higher stock price) o A decrease because the heightened risk of nuclear war means investor want a higher dividend to compensate them, which decreases the stock price A decrease because the heightened risk of nuclear war means potential investors will want to be compensated for the higher risk with a higher return, which can happen from paying less for a stock (i.e., lower stock price)

Explanation / Answer

Ans option D

It's a geopolitical risk

And with increase of geopolitical risk, investor would demand more return for investing , which can happen by paying less for the stock

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