Which of the Following Statements Is Correct

question 61

Multiple Choice

Which of the following statements is correct?

• A)If a company's beta doubles, then its required rate of return will also double.
• B)Other things held constant, if investors suddenly became convinced that there would be deflation in the economy, then the required returns on all stocks should increase.
• C)If a company's beta were cut in half, then its required rate of return would also be halved.
• D)If the risk-free rate rises by 0.5% but the market risk premium declines by that same amount, then the required rates of return on an average stock will remain unchanged, but required returns on stocks with betas less than 1.0 will rise.

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Definitions:

Price of Milk

The amount of money required to purchase a specific quantity of milk, which can vary due to factors like supply and demand, production costs, and market conditions.

Supply of DVDs

This refers to the total number of DVDs available for sale, influenced by manufacturing output, demand, and distribution capabilities.

Equilibrium Price

The price at which the quantity of a good or service demanded equals its supply in the market, leading to economic balance.

Demand for DVDs

The desire of consumers to purchase digital versatile discs (DVDs), which is influenced by factors such as price, income levels, and the availability of alternative media.