Which of the Following Statements Is CORRECT

question 93

Multiple Choice

Which of the following statements is CORRECT?

• A) Other things held constant, if investors suddenly become convinced that there will be deflation in the economy, then the required returns on all stocks should increase.
• B) If a company's beta were cut in half, then its required rate of return would also be halved.
• C) If the risk-free rate rises by 0.5% but the market risk premium declines by that same amount, then the required rates of return on stocks with betas less than 1.0 will decline while returns on stocks with betas above 1.0 will increase.
• D) If the risk-free rate rises by 0.5% but the market risk premium declines by that same amount, then the required rate of return on an average stock will remain unchanged, but required returns on stocks with betas less than 1.0 will rise.
• E) If a company's beta doubles, then its required rate of return will also double.

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Definitions:

Denial

A defense mechanism in which a person refuses to acknowledge reality or facts, often as a means to protect themselves from discomfort.

Dependency

In psychology, refers to a reliance on substances, behaviours, or other individuals that affects one's mental or physical health.

Major Neurocognitive Disorders

Previously known as dementia, these disorders involve significant cognitive decline from a previous level of performance in one or more cognitive domains.

Age Increases

Refers to the natural, chronological advancement in age which is often associated with changes in physical, psychological, and social aspects of an individual's life.