Stock a Has a Beta = 0

question 1

Multiple Choice

Stock A has a beta = 0.8, while Stock B has a beta = 1.6. Which of the following statements is most correct?

• A) Stock B's required return is double that of Stock A's.
• B) An equally weighted portfolio of Stock A and Stock B will have a beta less than 1.2.
• C) If market participants become more risk averse, the required return on Stock B will increase more than the required return for Stock A.
• D) All of the answers above are correct.
• E) Answers a and c are correct.

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Definitions:

Communication

The process of transmitting information, ideas, emotions, skills, and knowledge from one person or group to another.

Negotiation

A dialogue between two or more parties aimed at reaching a consensus or resolving a problem.

Social Bandwidth

The range and depth of interpersonal communication that can occur within a particular social interaction or through a communication medium.

Role Reversal

A situation in which two or more individuals switch roles or positions to gain a better understanding of the other's perspective or responsibilities.