IBM Has a Beta of 1

question 24

Multiple Choice

IBM has a beta of 1.0 and Apple Computer has a beta of 3.0. Which of the following statements must be correct?

• A) The market risk premium for Apple must be larger than the market risk premium of IBM.
• B) If investors become more risk averse, the expected return of Apple will increase more than the expected return on IBM.
• C) Apple's expected rate of return must be three times as large as IBM's.
• D) none of these choices are correct.

---

Definitions:

Electrocauterization

The use of a needle, probe, or loop heated by electric current to remove growths such as warts, to stop bleeding, and to control nosebleeds that either will not subside or continually recur.

Grounding Pad

A safety device used during surgical procedures to prevent burn injuries by dispersing excess electrical current away from the patient.

Freezing Cycle

A process involving the lowering of temperature to below 0°C, used in various contexts such as food preservation or climate patterns.

Proliferation Phase

The second phase of wound healing, in which new tissue forms, closing off the wound.