According to the Capital Asset Pricing Model

question 233

Multiple Choice

According to the capital asset pricing model:

• A) There is an inverse relationship between risk and return.
• B) A stock which earns a higher rate of return than the market should have a beta which is greater than 1.0.
• C) An increase in the risk-free rate without a corresponding increase in the market rate of return indicates that the risk premium for a stock with a beta of.8 will increase.
• D) A stock with a beta of 1 will see its expected rate of return increase by 20% if its beta rises to 1.2, all else constant.
• E) A stock with a beta of 2.0 will see its return decline by 2% should the risk-free rate decline from 3% to 2%, all else constant.

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Definitions:

Freud's

Pertaining to the theories of Sigmund Freud, which focus on psychoanalytic concepts of human behavior and personality development.

Psychoanalysis

A therapeutic approach and theory of psychology developed by Sigmund Freud emphasizing unconscious motives and conflicts.

Oral Psychosexual Stage

The first stage in Freud's psychosexual development theory, where an infant's pleasure centers on activities involving the mouth.

Generativity Versus Stagnation

A stage of adult development involving the concern for establishing and guiding the next generation.