Stock a Has a Beta of 0

question 58

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 (r_M − r_RF) were to increase but the risk-free rate (r_RF) remained constant, which of the following would occur?

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

---

Definitions:

Brain Growth Spurt

A period of rapid neural development, typically occurring in early childhood and adolescence.

Prenatal Development

The process of growth and development within the womb, from conception to birth, divided into the germinal, embryonic, and fetal stages.

Dendrite

Branch-like projections of a neuron that receive electrical signals from other neurons, crucial for neural communication.

Neuron

A nerve cell that is the basic building block of the nervous system, responsible for transmitting information throughout the body.