Nile Foods' Stock Has a Beta of 1

question 62

Multiple Choice

Nile Foods' stock has a beta of 1.4, while Elba Eateries' stock has a beta of 0.7. Assume that the risk- free rate, rRF, is 5.5% and the market risk premium, (rM - rRF) , equals 4%. Which of the following statements is correct?

• A) If the risk-free rate increases but the market risk premium remains unchanged, the required return will increase for both stocks but the increase will be larger for Nile since it has a higher beta.
• B) If the market risk premium increases but the risk-free rate remains unchanged, Nile's required return will increase because it has a beta greater than 1.0 but Elba's will decline because it has a beta less than 1.0.
• C) Since Nile's beta is twice that of Elba's, its required rate of return will also be twice that of Elba's.
• D) If the risk-free rate increases while the market risk premium remains constant, then the required return on an average stock will increase.

Identify the origins of the blaxploitation film genre and its key figures.

Understand the sociopolitical implications of the Afro hairstyle within the African American community.

Recognize influential cultural artifacts and figures of the black power movement, such as the song "To Be Young, Gifted, and Black".

Understand key events and figures in the civil rights movement of the 1950s and 1960s.

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A trait of being direct and clear in communication without hiding the truth or mincing words.