IBM Has a Beta of 1

question 79

Multiple Choice

IBM has a beta of 1.0 and Apple Computer has a beta of 3.0. Which of the following statements must be correct?

• A)The market risk premium for Apple must be larger than the market risk premium of IBM.
• B)If investors become more risk averse, the expected return of Apple will increase more than the expected return on IBM.
• C)Apple's expected rate of return must be three times as large as IBM's.
• D)none of these choices are complete.

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Definitions:

Dependent Variable

In experimental research, it is the variable that is measured to see if it is influenced by the independent variable.

Experiment

A research method used to test hypotheses and establish cause-and-effect relationships between variables, through controlled conditions and manipulation of one or more variables.

Temporal Sequence

The chronological order in which events or actions occur, emphasizing the importance of timing in understanding cause and effect.

External Validity

The judgment that a research finding can be generalized to other people, in other settings, at other times.