Assume That the Risk-Free Rate Remains Constant, but the Market

question 78

Multiple Choice

Assume that the risk-free rate remains constant, but the market risk premium declines. Which of the following is most likely to occurσ

• A) the required return on a stock with beta > 1.0 will increase.
• B) the return on "the market" will remain constant.
• C) the return on "the market" will increase.
• D) the required return on a stock with beta < 1.0 will decline.
• E) the required return on a stock with beta = 1.0 will not change.

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Definitions:

LLLP

A Limited Liability Limited Partnership (LLLP) is a form of partnership that provides limited liability to all its partners, combining characteristics of limited partnerships and limited liability partnerships.

LLC

Limited Liability Company, a flexible form of business enterprise that blends elements of partnership and corporate structures, providing limited liability to its owners.

Distributed First

A priority method in which resources or items are distributed initially before other actions are taken.

Transferee

A person or entity to whom rights, interests, or titles are transferred from another party.