Nile Food's Stock Has a Beta of 1

question 35

Multiple Choice

Nile Food's stock has a beta of 1.4, while Elba Eateries' stock has a beta of 0.7. Assume that the risk-free rate, rRF, is 5.5% and the market risk premium, (rM − rRF) , equals 4%. Which of the following statements is CORRECT?

• A) If the risk-free rate increases but the market risk premium remains unchanged, the required return will increase for both stocks but the increase will be larger for Nile since it has a higher beta.
• B) If the market risk premium increases but the risk-free rate remains unchanged, Nile's required return will increase because it has a beta greater than 1.0 but Elba's required return will decline because it has a beta less than 1.0.
• C) Since Nile's beta is twice that of Elba's, its required rate of return will also be twice that of Elba's.
• D) If the risk-free rate increases while the market risk premium remains constant, then the required return on an average stock will increase.
• E) If the market risk premium decreases but the risk-free rate remains unchanged, Nile's required return will decrease because it has a beta greater than 1.0 and Elba's will also decrease, but by more than Nile's because it has a beta less than 1.0.

Identify the theories related to the causes and consequences of prejudice and racism.

Explain the factors that contribute to aggression and how it can be mitigated.

Discuss the role of environmental, physiological, and psychological factors in influencing aggression.

Explain the process of helping behavior and the factors that influence the likelihood of bystander intervention.

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Definitions:

Leather

A durable and flexible material created by tanning animal rawhide and skins.

Supply

The total amount of a product or service that is available for purchase at any given time.

Demand

The amount of a product or service buyers are prepared and capable of buying at a specific price.

Tax

A mandatory monetary fee or different kind of tax enforced on a taxpayer by a government entity.