Final answer:
If a stock's expected return is less than its required return, the stock's price is expected to go down and its expected return will not increase.
Step-by-step explanation:
A stock's expected return refers to the return on investment that investors anticipate based on historical performance and future expectations. On the other hand, a stock's required return is the minimum return that investors expect in order to justify the risk associated with the stock.
If a stock's expected return is less than its required return, this means that the stock is not meeting investors' expectations and is considered less attractive. In such a scenario, investors would be more likely to sell the stock, leading to an increase in supply and a decrease in demand.
As a result, the stock's price is expected to go down (option c) and its expected return will not increase (option d) since it is not meeting investors' expectations.
Therefore, the correct answer is option e) Both C and D are expected.