Stock a Has a Beta of 0

question 51

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 constant?

• 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%.

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Definitions:

Taste Buds

Sensory organs located on the tongue that are primarily responsible for detecting the five established taste sensations: sweet, sour, salty, bitter, and umami.

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Referring to the decade from 1960 to 1969, noted for significant cultural, political, and social change worldwide.

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A condition associated with aging where the eye loses its ability to focus on close objects, commonly occurring after age 40.