Which of the Following Statements Is Most Correct

question 11

Multiple Choice

Which of the following statements is most correct?

• A) If investors become more risk averse, but rRF remains constant, the required rate of return on high beta shares will rise, the required return on low beta shares will decline, but the required return on an average risk shares will not change.
• B) If Mutual Fund A held equal amounts of 100 shares, each of which had a beta of 1.0, and Mutual Fund B held equal amounts of 10 shares with betas of 1.0, then the two mutual funds would have betas of 1.0 and thus would be equally risky from an investor's standpoint.
• C) An investor who holds just one share will be exposed to more risk than an investor who holds a portfolio of shares, assuming the shares are all equally risky.Since the holder of the 1-share portfolio is exposed to more risk, he or she can expect to earn a higher rate of return to compensate for the greater risk.
• D) Assume that the required rate of return on the market , rM, is given and fixed.If the yield curve were upward-sloping, then the Security Market Line (SML) would have a steeper slope if 1-year Treasury securities were used as the risk-free rate than if 30-year Treasury bonds were used for rRF.
• E) Statements a, b, c, and d are all false.

Relate economic growth rates to changes in trade balances and currency values.

Illustrate the role of speculations and expectations in foreign exchange markets.

Calculate and interpret exchange rates and their practical implications for international transactions.

Understand the basics of exchange rates and how they are determined in international markets.

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Definitions:

Photoreceptors

Specialized cells in the retina of the eye that respond to light, enabling vision.

Retina

A layer of tissue located at the back of the eye, containing cells that are sensitive to light and trigger nerve impulses that pass via the optic nerve to the brain.

Rhodopsin

A light-sensitive pigment found in the rod cells of the retina, crucial for low-light vision.

Photoreceptor

A light-sensitive cell located on the retina that converts light energy into neural impulses.