Share X Has $\beta$ ) = 40, Which Means That It Is Considered Four Times Riskier

question 47

Multiple Choice

Share X has ( $\beta$ ) . = 4.0, which means that it is considered four times riskier than the average share, or the share market as a whole.According to the capital asset pricing model, Share X should earn

• A) a total return that is four times greater than the market return, that is, rX = 4 * rM.
• B) a risk premium that is four times greater than the market risk premium-that is, RPX = 4 * RPM, which means that rX B kRF = 4 * (rM B kRF).
• C) a return that is less than the market return (rM) because, all else equal, the high risk associated with Share X will cause its value to decrease.
• D) the risk-free rate of return (rRF).
• E) None of the above is correct.

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Definitions:

Counterconditioning Techniques

Methods used in behavioral therapy to reduce unwanted behaviors by associating them with positive stimuli.

Mary Cover Jones

An early psychologist known for her work in desensitization and conditioning, often considered the "mother of behavior therapy."

Behavioral Psychologist

A professional in psychology who focuses on understanding and modifying behavior through learning theory and behavior analysis.

Behavior Therapy

A form of psychotherapy that aims to change undesirable behaviors through conditioning techniques.