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%.

---

Definitions:

Etiquette

The anticipated standards of conduct in a specific context.

Manners

Socially acceptable behaviors and practices that show respect and consideration for others.

Social Settings

Environments where individuals interact with one another, often governed by norms and cultural practices.

Proper Etiquette

The set of conventional rules and manners that are considered appropriate and respectful in social or professional settings.