Stock a Has a Beta of 1

question 106

Multiple Choice

Stock A has a beta of 1.2 and a standard deviation of returns of 14%.Stock B has a beta of 1.8 and a standard deviation of returns of 18%.If the risk-free rate of return increases and the market risk premium remains constant,then

• A) the required return on stock B will increase more than the required return on stock A.
• B) the required returns on stocks A and B will both increase by the same amount.
• C) the required returns on stocks A and B will not change.
• D) the required return on stock A will increase more than the required return on stock B.

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Definitions:

Fischer Projection

A two-dimensional drawing style used to represent three-dimensional molecules of carbohydrates and amino acids.

D-Glucose

A naturally occurring form of glucose, a simple sugar that serves as a primary source of energy for living organisms.

Open-Chain Form

Describes a molecular structure that consists of atoms connected in a linear or branched sequence, rather than a closed ring.

Fischer Projection

A method to represent the three-dimensional structure of molecules, such as carbohydrates and amino acids, on a two-dimensional plane using crossed lines.