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

question 30

Multiple Choice

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

• A) The effect of a change in the market risk premium depends on the slope of the yield curve.
• B) If the market risk premium increases by 1%, then the required return on all stocks will rise by 1%.
• C) 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.
• D) The effect of a change in the market risk premium depends on the level of the risk-free rate.
• E) 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.

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Definitions:

Vicarious Learning

Is the process of learning by observing the actions, outcomes, and consequences of others' behavior, rather than through direct experience.

Vicarious Learning

is the process of learning by observing the actions and consequences of others' behavior, rather than through direct experience.

Desensitization

The process by which repeated exposure to a stimulus (e.g., violence) reduces emotional responsiveness to the stimulus over time.

Cultivation Theory

A theory that suggests that heavy exposure to media, particularly television, shapes viewers' perceptions of reality.