An Increase in the Beta of a Corporation, All Else

question 71

Multiple Choice

An increase in the beta of a corporation, all else being the same, indicates ________.

• A) a decrease in risk, a higher required rate of return, and hence a lower share price
• B) an increase in risk, a higher required rate of return, and hence a lower share price
• C) a decrease in risk, a lower required rate of return, and hence a higher share price
• D) an increase in risk, a lower required rate of return, and hence a higher share price

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Definitions:

Total Liability

The combined amount of debts and obligations that a company owes to outside parties.

Total Expenses

The total amount of money spent by a business during a specific period, including both fixed and variable costs.

Total Assets

The sum of all assets owned by a company, including current, fixed, and intangible assets, reflecting the total resources it has at its disposal.

Depreciation

The process of allocating the cost of a tangible asset over its useful life, representing the asset's consumption or wear and tear.