Stock a Has a Beta of 0

question 49

Multiple Choice

Stock A has a beta of 0.8 and Stock B has a beta of 1.2.50% of Portfolio P is invested in Stock A and 50% is invested in Stock B.If the market risk premium (r_M - r_RF) were to increase but the risk-free rate (r_RF) remained constant,which of the following would occur?

• A) The required return would increase for both stocks but the increase would be greater for Stock B than for Stock A.
• B) The required return would decrease by the same amount for both Stock A and Stock B.
• C) The required return would increase for Stock A but decrease for Stock B.
• D) The required return on Portfolio P would remain unchanged.
• E) The required return would increase for Stock B but decrease for Stock A.

---

Definitions:

Adaptive Decision Making

A process of making choices by altering decisions based on new information or changing environments.

SDLC

Stands for Software Development Life Cycle, a process framework used to develop software in a systematic and cost-effective way, encompassing phases from initial planning to maintenance.

Development

The process of planning, creating, testing, and deploying an application or software, which can also refer to personal, economic, or social progress.

Design

The process of envisioning and planning the creation of objects, systems, or interactive experiences to fulfill certain functions or address specific needs.