HR Corporation Has a Beta of 2

question 83

Multiple Choice

HR Corporation has a beta of 2.0,while LR Corporation's beta is 0.5.The risk-free rate is 10%,and the required rate of return on an average stock is 15%.Now the expected rate of inflation built into r_RF falls by 3 percentage points,the real risk-free rate remains constant,the required return on the market falls to 11%,and the betas remain constant.When all of these changes are made,what will be the difference in required returns on HR's and LR's stocks?

• A) 1.0%
• B) 2.5%
• C) 4.5%
• D) 5.4%
• E) 6.0%

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Definitions:

Evaluate Data

The process of systematically examining and analyzing data to draw conclusions, make informed decisions, or assess outcomes.

Case Study Methods

A research approach that investigates a subject or phenomenon in depth and in its real-life context, often through detailed, qualitative analysis.

Ethnographic Studies

Research studies that involve observing and sometimes participating in the daily life of a group or community to understand their culture, practices, and social interactions.

Quasi-Experimental Designs

refers to research designs that attempt to establish cause-and-effect relationships but lack the element of random assignment to treatment or control groups.