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:

Other Accounts Cr.

This term likely refers to the credit (Cr.) entries in accounts other than those frequently categorized, perhaps implying adjustments or less common financial transactions.

Purchases Journals

Accounting journals used to record all purchases of goods and services on credit for the purpose of resale.

Cash Receipts Journal

A dedicated accounting journal used to record all cash inflows or receipts, including cash sales and accounts receivable collections.

Other Accounts Column

A column in ledger books or accounting journals used to record transactions that do not fit into the standard categories provided, offering flexibility for miscellaneous entries.