Stock a Has a Beta = 0

question 36

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)Stock B's required return is double that of Stock A's.
• B)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.
• C)An equally weighted portfolio of Stocks A and B will have a beta lower than 1.2.
• 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.

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Definitions:

Levator Palpebrae Superioris

A muscle in the orbit of the eye responsible for elevating the upper eyelid.

Rectus Muscle

Any of several straight muscles, particularly those found in the abdomen and the eyes.

Superior Tarsus

A structure in the eyelid, a stiff plate of connective tissue that gives the eyelid its shape and support.

Thenar

Refers to the fleshy mass on the palm of the hand at the base of the thumb, consisting of muscles involved in thumb movements.