Which of the Following Statements Is CORRECTσ

question 126

Multiple Choice

Which of the following statements is CORRECTσ

• A) other things held constant, if investors suddenly become convinced that there will be deflation in the economy, then the required returns on all stocks should increase.
• B) if a company's beta were cut in half, then its required rate of return would also be halved.
• C) if the risk-free rate rises by 0.5% but the market risk premium declines by that same amount, then the required rates of return on stocks with betas less than 1.0 will decline while returns on stocks with betas above 1.0 will increase.
• D) if the risk-free rate rises by 0.5% but the market risk premium declines by that same amount, then the required rate of return on an average stock will remain unchanged, but required returns on stocks with betas less than 1.0 will rise.
• E) if a company's beta doubles, then its required rate of return will also double.

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Definitions:

Electroencephalogram

A test or record of brain activity produced by electroencephalography, which measures electrical activity in the brain.

Electrical Activity

Biological phenomenon related to the movement of charged particles, such as ions, within and between cells, contributing to various physiological functions including nerve impulse transmission and muscle contraction.

Scalp

The skin covering the upper part of the head, often referred to in the context of hair growth or medical conditions affecting this area.

Seizure Activity

A sudden surge of electrical activity in the brain leading to changes in behavior, movement, feeling, or consciousness.