Assume that an investor is offered a choice of a risk-free government bond that is expected to return 3.5% or a high-risk corporate stock. According to one of the principles of finance, what would induce the investor to purchase the corporate stock

What would induce the investor to purchase the corporate stock is a rate of return that is significantly higher than 3.5% of a risk-free government bond.

Explanation:

A high-risk investment can be described as an investment in which the level of risk is high and the probability of losing a significant portion or all of the money invested is high. As a result, underperformance is more likely in high-risk Investments than in other types of investments.

According to one of the principles of finance, the only incentive for inventors to invest in high-risk investment is the rate of return that is significantly higher than the rate of return of risk-free investments.

Therefore, what would induce the investor to purchase the corporate stock is a rate of return that is significantly higher than 3.5% of a risk-free government bond.