Assume That the Risk-Free Rate Is 6% and the Market

question 81

Multiple Choice

Assume that the risk-free rate is 6% and the market risk premium is 5%. Given this information, which of the following statements is CORRECTσ

• A) if a stock has a negative beta, its required return must also be negative.
• B) an index fund with beta = 1.0 should have a required return less than 11%.
• C) if a stock's beta doubles, its required return must also double.
• D) an index fund with beta = 1.0 should have a required return greater than 11%.
• E) an index fund with beta = 1.0 should have a required return of 11%.

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Definitions:

Informed Consent

A principle that requires providing all necessary information about a procedure or research study to participants, allowing them to voluntarily decide whether to participate.

Experimenter Biasing

Refers to a situation in research where the expectations or preferences of the researcher inadvertently influence the participants or the results of the study.

Demand Characteristics

Subtle cues or signals in an experimental environment that influence the participants' behavior or responses.

Deception

The act of causing someone to accept as true or valid what is false or invalid.