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:

Propionibacterium

A genus of gram-positive bacteria associated with the production of propionic acid and found in dairy products and as part of human skin flora.

Ringworm

A fungal infection of the skin characterized by ring-shaped, red, itchy patches.

Fungus

A kingdom of spore-producing organisms feeding on organic matter, including molds, yeast, mushrooms, and toadstools.

Sebaceous Glands

Glands located under the skin that produce sebum, an oily substance that lubricates skin and hair.