Everything Else Held Constant, If the Expected Return on Bonds

Multiple Choice

Everything else held constant, if the expected return on bonds falls from 10 to 5 percent and the expected return on GE stock rises from 7 to 8 percent, then the expected return of holding GE stock ________ relative to bonds and the demand for GE stock ________.

A) rises; rises
B) rises; falls
C) falls; rises
D) falls; falls