Stock a Has a Beta = 0

question 18

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 marginal investor becomes more risk averse,the required return on Stock A will increase by more than the required return on Stock B.
• E) 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:

Spastic Hemiplegia

A form of cerebral palsy that affects one side of the body, characterized by stiff and contracted muscles.

Smooth Muscles

Involuntary muscles found in the walls of internal organs and blood vessels, which contract to control various body functions.

Autonomic Nervous System

The autonomic nervous system is part of the peripheral nervous system that controls involuntary bodily functions, including heart rate, digestion, and respiratory rate.

Gray Matter

A major component of the central nervous system, consisting of neuronal cell bodies, dendrites, and unmyelinated axons, associated with processing and cognition.