All Else Held Constant, Which of the Following Will Increase

question 84

Multiple Choice

All else held constant, which of the following will increase the expected return on a security based on CAPM? Assume the market return exceeds the risk-free rate and both values are positive. Also assume the beta exceeds 1.0.
I. decrease in the security beta
II. increase in the market risk premium
III. decrease in the risk-free rate
IV. increase in the market rate of return

• A)I and III only
• B)II and IV only
• C)I, II, and IV only
• D)II, III, and IV only
• E)I, II, III, and IV

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Definitions:

Accretionary Prism

A wedge-shaped mass of sediment and rock scraped off the top of a downgoing tectonic plate at a convergent plate boundary, often leading to the formation of new land.

Volcanic Mountain Belt

A region typically found at convergent plate boundaries, characterized by a series of volcanoes formed from the melting of subducted lithosphere.

Crustal Extension

The process by which the Earth's crust is stretched and thinned, often associated with the formation of rift valleys and basins.

Mesozoic

An era of geological time from about 252 to 66 million years ago, known for the rise of dinosaurs and significant volcanic activity.