Suppose That During the Coming Year, the Risk Free Rate

question 111

Multiple Choice

Suppose that during the coming year, the risk free rate, rRF, is expected to remain the same, while the market risk premium (rM - rRF) , is expected to fall. Given this forecast, which of the following statements is CORRECT?

• A) the required return on all stocks will remain unchanged.
• B) the required return will fall for all stocks, but it will fall more for stocks with higher betas.
• C) the required return for all stocks will fall by the same amount.
• D) the required return will fall for all stocks, but it will fall less for stocks with higher betas.
• E) the required return will increase for stocks with a beta less than 1.0 and will decrease for stocks with a beta greater than 1.0.

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Definitions:

Recurrent Persistent Impulse

A repeated, ongoing urge to perform an act, often uncontrollably, which may lead to negative consequences.

Imminent Doom

A strong feeling of impending disaster or danger, often associated with anxiety disorders and panic attacks.

Panic Attack

A sudden episode of intense fear or anxiety, characterized by physical and psychological symptoms that can be overwhelming.

Generalized Anxiety Disorder

A mental health disorder characterized by persistent and excessive worry about various aspects of life, beyond what might be considered reasonable.