The Risk-Free Rate Is 6%; Stock a Has a Beta

question 75

Multiple Choice

The risk-free rate is 6%; Stock A has a beta of 1.0; Stock B has a beta of 2.0; and the market risk premium, r_M − r_RF, is positive. Which of the following statements is CORRECT?

• A) If the risk-free rate increases but the market risk premium stays unchanged, Stock B's required return will increase by more than Stock A's.
• B) Stock B's required rate of return is twice that of Stock A.
• C) If Stock A's required return is 11%, then the market risk premium is 5%.
• D) If Stock B's required return is 11%, then the market risk premium is 5%.
• E) If the risk-free rate remains constant but the market risk premium increases, Stock A's required return will increase by more than Stock B's.

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Definitions:

Mating Approach

Strategies or behaviors exhibited by individuals to attract and secure a mate for reproduction.

Nutritional Conditions

The status of the availability and quality of nutrients in an organism's environment, affecting its growth, health, and survival.

Insulin Receptor Gene

A gene that codes for the insulin receptor, playing a critical role in the regulation of blood glucose levels and metabolic processes, with mutations affecting diabetes susceptibility.

Mating Approach

The strategies or behaviors employed by individuals to attract and engage with potential mates, which can vary widely across species.