What Will Happen to the Expected Return on a Stock

question 11

Multiple Choice

What will happen to the expected return on a stock with a Beta of 1.5 and a market risk premium of 9% if the Treasury bill yield increases from 3% to 5%?

• A)the expected return will remain unchanged
• B)the expected return will increase by 1.0%
• C)the expected return will increase by 2.0%
• D)the expected return will increase by 3.0%

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Definitions:

Economic Development

The process by which a nation improves the economic, political, and social well-being of its people, often through industrial, technological, and infrastructural advancements.

Social Loafing

The tendency to put forth less effort when working with others on a common task than when working alone.

Compliance

The act of conforming to a request or demand, often studied in social psychology.

Groupthink

A phenomenon that occurs within a group of people, in which the desire for harmony or conformity results in an irrational or dysfunctional decision-making outcome.