Which of the Following Statements Is Correct? (Assume That the Risk-Free

question 86

Multiple Choice

Which of the following statements is correct? (Assume that the risk-free rate is a constant.)

• A)If the market risk premium increases by 1%, then the required return will increase for stocks that have a beta greater than 1.0, but it will decrease for stocks that have a beta less than 1.0.
• B)The effect of a change in the market risk premium depends on the slope of the yield curve.
• C)If the market risk premium increases by 1%, then the required return on all stocks will rise by 1%.
• D)If the market risk premium increases by 1%, then the required return will increase by 1% for a stock that has a beta of 1.0.

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Definitions:

Nerve Tract

A bundle of nerve fibers (axons) within the central nervous system connecting one area to another, to transmit signals.

Sensation Loss

The partial or total loss of the ability to feel or perceive stimuli in specific areas of the body.

Neuralgia

A condition characterized by intense, typically intermittent pain along the course of a nerve, often without an obvious physical cause.

Nerve Tract

A bundle of nerve fibers (axons) within the central nervous system that connects different parts of the nervous system.