Stock a Has a Beta of 0

question 129

Multiple Choice

Stock A has a beta of 0.8 and Stock B has a beta of 1.2. 50% of Portfolio P is invested in Stock A and 50% is invested in Stock B. If the market risk premium (rM − rRF) were to increase but the risk-free rate (rRF) remained constant, which of the following would occur?

• A) The required return would increase for both stocks but the increase would be greater for Stock B than for Stock A.
• B) The required return would decrease by the same amount for both Stock A and Stock B.
• C) The required return would increase for Stock A but decrease for Stock B.
• D) The required return on Portfolio P would remain unchanged.
• E) The required return would increase for Stock B but decrease for Stock A.

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Definitions:

Outermost Membrane

The most external membrane that encloses a cell or organelle, serving as a protective barrier and mediating interactions with the external environment.

Extraembryonic Membrane

A set of tissues formed by embryos of amniotes (reptiles, birds, and mammals) that provide support and protection but do not form part of the body of the embryo itself.

Blood Vessels

Blood vessels are tubular structures carrying blood throughout the body, including arteries, veins, and capillaries.

Human Chorionic Gonadotropin

Human chorionic gonadotropin is a hormone produced during pregnancy that supports the normal development of an egg in a woman's ovary, and stimulates the release of the egg during ovulation.