Stock a Has a Beta of 0

question 122

Multiple Choice

Stock A has a beta of 0.7,whereas Stock B has a beta of 1.3.Portfolio P has 50% invested in both A and B.Which of the following would occur if the market risk premium increased by 1% but the risk-free rate remained constant?

• A) The required return on Portfolio P would increase by 1%.
• B) The required return on both stocks would increase by 1%.
• C) The required return on Portfolio P would remain unchanged.
• D) The required return on Stock A would increase by more than 1%,while the return on Stock B would increase by less than 1%.
• E) The required return for Stock A would fall,but the required return for Stock B would increase.

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Definitions:

Rental Income

Income received from leasing property to tenants, considered taxable income and must be reported to tax authorities.

Masters Golf Tournament

An annual prestigious golf championship held at Augusta National Golf Club in the United States.

Passive Activity

Economic activities in which the taxpayer does not materially participate, often resulting in income or losses for tax purposes.

Rental Activity

Involves leasing property to others and is often subject to specific tax rules and reporting obligations, including the possibility of passive activity loss limitations.