Stock a Has a Beta of 0

question 129

Multiple Choice

Stock A has a beta of 0.8 and Stock B has a beta of 1.2. 50% of Portfolio P is invested in Stock A and 50% is invested in Stock B. If the market risk premium (rM − rRF) were to increase but the risk-free rate (rRF) remained constant, which of the following would occur?

• A) The required return would increase for both stocks but the increase would be greater for Stock B than for Stock A.
• B) The required return would decrease by the same amount for both Stock A and Stock B.
• C) The required return would increase for Stock A but decrease for Stock B.
• D) The required return on Portfolio P would remain unchanged.
• E) The required return would increase for Stock B but decrease for Stock A.

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Definitions:

Biological Approach

A perspective in psychology that examines behavioral and mental processes through the lens of biological science, emphasizing genetics, neurotransmitters, and the anatomy of the brain.

Genetic Factors

Hereditary influences on individual differences in behavior and predispositions to diseases and other biological traits.

Neurotransmitter Functioning

The role played by neurotransmitters in transmitting signals across a chemical synapse, from one neuron to another.

Sources of Abnormality

Factors or conditions that contribute to the development of psychological disorders or abnormal behavior.