Assume That the Risk-Free Rate Is 6% and the Market

question 67

Multiple Choice

Assume that the risk-free rate is 6% and the market risk premium is 5%.Given this information, which of the following statements is CORRECT?

• A) If a stock has a negative beta, its required return must also be negative.
• B) An index fund with beta = 1.0 should have a required return less than 11%.
• C) If a stock's beta doubles, its required return must also double.
• D) An index fund with beta = 1.0 should have a required return greater than 11%.
• E) An index fund with beta = 1.0 should have a required return of 11%.

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Definitions:

Yin

A principle in Chinese philosophy and medicine representing the negative, dark, and feminine forces in nature, complementary to yang.

Yang

In Chinese philosophy, yang represents the bright, active, and masculine aspects of energy or force, part of the yin-yang complementary pair.

Medicine Man

A traditional healer and spiritual leader in many indigenous cultures, known for using herbal remedies and rituals to treat ailments and offer guidance.

Subcultures

Groups within a larger culture that distinguish themselves through unique traditions, values, or behaviors.