Which of the Following Statements Is CORRECT

question 93

Multiple Choice

Which of the following statements is CORRECT?

• A) Other things held constant, if investors suddenly become convinced that there will be deflation in the economy, then the required returns on all stocks should increase.
• B) If a company's beta were cut in half, then its required rate of return would also be halved.
• C) If the risk-free rate rises by 0.5% but the market risk premium declines by that same amount, then the required rates of return on stocks with betas less than 1.0 will decline while returns on stocks with betas above 1.0 will increase.
• D) If the risk-free rate rises by 0.5% but the market risk premium declines by that same amount, then the required rate of return on an average stock will remain unchanged, but required returns on stocks with betas less than 1.0 will rise.
• E) If a company's beta doubles, then its required rate of return will also double.

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Definitions:

Unilateral Mistake

In contract law, a mistake made by only one of the contracting parties. Unilateral mistake does not offer sufficient grounds for recession or renegotiation.

Rescind Contract

The process of legally voiding a contract, thereby returning all the parties involved to their original state as if the contract had never occurred.

Firm Offer

In contract law, refers to an offer that remains valid for a specified period during which it cannot be withdrawn by the offeror.