Which of the Following Statements Is CORRECTσ (Assume That the Risk-Free

question 48

Multiple Choice

Which of the following statements is CORRECTσ (Assume that the risk-free rate is a constant.)

• A) the effect of a change in the market risk premium depends on the slope of the yield curve.
• B) if the market risk premium increases by 1%, then the required return on all stocks will rise by 1%.
• C) if the market risk premium increases by 1%, then the required return will increase by 1% for a stock that has a beta of 1.0.
• D) the effect of a change in the market risk premium depends on the level of the risk-free rate.
• E) if the market risk premium increases by 1%, then the required return will increase for stocks that have a beta greater than 1.0, but it will decrease for stocks that have a beta less than 1.0.

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Definitions:

Enthalpy

A thermodynamic quantity equivalent to the total heat content of a system, often used in the study of heat transfer in chemical reactions.

Hydrogen Acceptor

A molecule that receives or accepts hydrogen atoms or ions during a chemical reaction.

Nicotinamide Adenine Dinucleotide Phosphate

A coenzyme involved in redox reactions, carrying electrons from one reaction to another and playing a crucial role in anabolism and the immune response.

Photosynthesis

The process by which green plants and some other organisms use sunlight to synthesize nutrients from carbon dioxide and water.