Which of the Following Statements Is CORRECT

question 56

Multiple Choice

Which of the following statements is CORRECT?

• A) Beta is measured by the slope of the security market line.
• B) If the risk-free rate rises,then the market risk premium must also rise.
• C) If a company's beta is halved,then its required return will also be halved.
• D) If a company's beta doubles,then its required return will also double.
• E) The slope of the security market line is equal to the market risk premium, (r_M - r_RF).

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Definitions:

Net Purchases

The total amount of purchases after subtracting returns, allowances, and discounts.

Revolving Credit Agreement

A credit facility allowing a borrower to withdraw, repay, and redraw loans repeatedly up to a certain credit limit.

Commitment Fee

A banking fee charged by lenders to secure a line of credit or a loan, often paid by borrowers to guarantee access to credit.

Prime Rate

The interest rate that commercial banks charge their most creditworthy customers, often used as a benchmark for other interest rates.