You Are Holding a Stock Which Has a Beta of 2.0

question 68

Multiple Choice

You are holding a stock which has a beta of 2.0 and is currently in equilibrium. The required return on the stock is 15 percent, and the return on an average stock is 10 percent. What would be the percentage change in the return on the stock, if the return on an average stock increased by 30 percent while the risk-free rate remained unchanged?

• A) +20%
• B) +30%
• C) +40%
• D) +50%
• E) +60%

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Definitions:

Observational Learning

The process of acquiring new behaviors or information by watching and imitating others.

Operant Conditioning

A learning process whereby behaviors are influenced by the consequences that follow them, such as rewards or punishments.

Models

Representations or simulations of a system or concept, used in various fields to simplify, explain, or predict complex realities.

Classical Conditioning

An instructional process in which two stimuli are systematically paired together; the response that was firstly brought about by the second stimulus is ultimately brought about by the first stimulus by itself.