Which of the Following Statements Is CORRECT

question 131

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, (rM − rRF).

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Definitions:

Outward Shift

Refers to an expansion in an economy's production possibility frontier, indicating an increase in the ability to produce goods and services.

Production Possibilities Curve

A graphical representation showing the maximum combination of goods or services that can be produced with a fixed amount of resources and technology in a given period.

7 Percent Unemployment

A situation where 7 out of every 100 labor force participants are without a job and actively seeking employment, indicating the level of joblessness in an economy.

U.s. Economy

The United States' economic structure is defined by a mixed-market system, incorporating both private sector businesses and government involvement.