Stock a Has a Beta of 1

question 24

Multiple Choice

Stock A has a beta of 1.2 and a standard deviation of returns of 18%.Stock B has a beta of 1.8 and a standard deviation of returns of 18%.If the market risk premium increases,then

• A) the required return on stock B will increase more than the required return on stock A.
• B) the required returns on stocks A and B will both increase by the same amount.
• C) the required returns on stocks A and B will remain the same.
• D) the required return on stock A will increase more than the required return on stock B.

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Definitions:

Research Designs

Specific strategies or methodologies used by researchers to conduct experiments and observe outcomes in a systematic manner.

Negative Correlation

A connection between two variables where as one variable goes up, the other comes down.

Psychological Disorder

A mental or behavioral pattern that causes significant distress or impairment in personal functioning.

Correlation Coefficients

Statistical measures that describe the extent to which two variables change together, indicating the strength and direction of their relationship.