Stock a Has a Beta of 1

question 24

Multiple Choice

Stock A has a beta of 1.2 and a standard deviation of returns of 18%.Stock B has a beta of 1.8 and a standard deviation of returns of 18%.If the market risk premium increases,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 remain the same.
• D) the required return on stock A will increase more than the required return on stock B.

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Definitions:

Generic Products

Products marketed without a brand name, often characterized by lower prices and standard quality levels.

Ultimate Consumer

The end user of a product who purchases it for personal, family, or household use, as opposed to purchasing it for resale or for creating another product.

Industrial Buyer

An individual or organization that purchases goods or services for use in the production of other products or for resale.

Consumer Products

Goods that are purchased by individuals for personal use rather than for manufacturing or resale.