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:

Diet

The sum of food and drink that an individual habitually consumes, which can significantly impact health and well-being.

Wrinkling

The formation of creases, folds, or ridges on the skin, typically as a result of aging, skin damage, or dehydration.

Automatic

Operations or processes that require minimal conscious thought and effort, often due to learning or repetition.

Health Consequences

The outcome or impacts on a person's physical well-being resulting from certain behaviors, lifestyle choices, or environmental exposures.