Stock a Has a Beta of 0

question 31

Multiple Choice

Stock A has a beta of 0.7,whereas Stock B has a beta of 1.3.Portfolio P has 50% invested in both A and B.Which of the following would occur if the market risk premium increased by 1%? (Assume that the risk-free rate remains constant.)

• A)The required return on Portfolio P would increase by 1%.
• B)The required return on both stocks would increase by 1%.
• C)The required return on Portfolio P would remain unchanged.
• D)The required return on Stock A would increase by more than 1%, while the return on Stock B would increase by less than 1%.

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Definitions:

False Sense

False sense refers to an incorrect or misleading perception or belief about a situation, often causing misjudgment or errors in decision-making.

Cooperative

An organization owned and operated by its members for their mutual benefit, often focusing on shared goals or interests.

Conflict Management Style

Conflict management style refers to the particular approach or strategy an individual or organization prefers to use when addressing and resolving disputes or disagreements.

Ombudsman

An official appointed to investigate individuals' complaints against maladministration, especially that of public authorities.