You Are Holding a Stock with a Beta of 2

question 20

Multiple Choice

You are holding a stock with a beta of 2.0 that is currently in equilibrium. The required rate of return on the stock is 15% versus a required return on an average stock of 10%. Now the required return on an average stock increases by 30.0% (not percentage points) . The risk-free rate is unchanged. By what percentage (not percentage points) would the required return on your stock increase as a result of this event?

• A) 36.10%
• B) 38.00%
• C) 40.00%
• D) 42.00%
• E) 44.10%

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Definitions:

Neurotransmitters

Chemical messengers that transmit signals across a chemical synapse, from one neuron (nerve cell) to another 'target' neuron, muscle cell, or gland cell.

Neurons

Cells in the nervous system specialized for the transmission of information via chemical and electrical signals.

Occipital

Pertaining to the occipital lobe, a region of the brain located at the back of the head that is responsible for processing visual information.

Cerebral Cortex

The brain's outermost layer responsible for higher-order brain functions such as sensory perception, cognition, and motor control.