Stock a Has a Beta of 0

question 20

Multiple Choice

Stock A has a beta of 0.8,Stock B has a beta of 1.0,and Stock C has a beta of 1.2.Portfolio P has equal amounts invested in each of the three stocks.Each of the stocks has a standard deviation of 25%.The returns on the three stocks are independent of one another (i.e.,the correlation coefficients all equal zero) .Assume that there is an increase in the market risk premium,but the risk-free rate remains unchanged.Which of the following statements is correct?

• A)The required return of all stocks will remain unchanged since there was no change in their betas.
• B)The required return on Stock A will increase by less than the increase in the market risk premium, while the required return on Stock C will increase by more than the increase in the market risk premium.
• C)The required return on the average stock will remain unchanged, but the returns of riskier stocks (such as Stock C) will increase while the returns of safer stocks (such as Stock A) will decrease.
• D)The required return on the average stock will remain unchanged, but the returns of riskier stocks (such as Stock C) will decrease while the returns on safer stocks (such as Stock A) will increase.

Understand the significance of villi in nutrient absorption and the impact of their degeneration.

Comprehend the role of enzymes in food digestion beyond the stomach.

Identify the structures and regions of the respiratory system.

Describe the pathway air takes through the respiratory system.

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Definitions:

Short-Run Phillips Curve

An economic model suggesting an inverse relationship between the rate of inflation and the unemployment rate in the short term.

Sacrifice Ratio

The measure of the decline in a country's economic output as a result of efforts to reduce inflation.

High Inflation

A condition characterized by a significant and sustained rise in the general level of prices for goods and services, eroding purchasing power.

Nominal Wages

The wages paid to employees measured in current money and not adjusted for inflation, reflecting the face value of earnings.