Stock a Has a Beta = 0

question 131

Multiple Choice

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

• A) If the marginal investor becomes more risk averse, the required return on Stock B will increase by more than the required return on Stock A.
• B) An equally weighted portfolio of Stocks A and B will have a beta lower than 1.2.
• C) If the marginal investor becomes more risk averse, the required return on Stock A will increase by more than the required return on Stock B.
• D) If the risk-free rate increases but the market risk premium remains constant, the required return on Stock A will increase by more than that on Stock B.
• E) Stock B's required return is double that of Stock A's.

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Definitions:

Functional Conflict

Disagreements that contribute positively to organizational outcomes by enhancing work processes or performance.

Groupthink

A psychological phenomenon that occurs within a group of people, in which the desire for harmony or conformity results in an irrational or dysfunctional decision-making outcome.

Administrative Orbiting

A tactic used to delay decision-making through endless reviews and requests for additional information without outright refusal.

Distributive Bargaining

A negotiation strategy that focuses on dividing a limited amount of resources between parties where one party's gain is the other's loss.