Stock a Has a Beta of 0

question 67

Multiple Choice

Stock A has a beta of 0.7, whereas Stock B has a beta of 1.3. Portfolio P has 50% invested in both A and B. Which of the following would occur if the market risk premium increased by 1% but the risk-free rate remained constantσ

• A) the required return on both stocks would increase by 1%.
• B) the required return on portfolio p would remain unchanged.
• C) the required return on stock a would increase by more than 1%, while the return on stock b would increase by less than 1%.
• D) the required return for stock a would fall, but the required return for stock b would increase.
• E) the required return on portfolio p would increase by 1%.

Understand the paradox of voting and its implications for democratic decision-making.

Analyze the concepts of median-voter model and its predictions in election outcomes.

Assess market failures and the role of government in addressing them.

Recognize the impact of subsidies and externalities on market efficiency.

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Definitions:

Multiple Regression

A mathematical method that establishes the connection between a dependent variable and multiple independent variables through the application of a linear equation to the collected data.

Estimated Form

A representation of a model or function based on estimated parameters or coefficients.

Independent Variables

Variables in an experiment that are manipulated or controlled by the researcher to investigate their effects on dependent variables.

Numerator

The top number in a fraction that represents the part of the whole that is being considered.