Portfolio P Has Equal Amounts Invested in Each of the Three

question 97

Multiple Choice

Portfolio P has equal amounts invested in each of the three stocks, A, B, and C.Stock A has a beta of 0.8, Stock B has a beta of 1.0, and Stock C has a beta of 1.2.Each of the stocks has a standard deviation of 25%.The returns on the three stocks are independent of one another (i.e., the correlation coefficients all equal zero) .Assume that there is an increase in the market risk premium, but the risk-free rate remains unchanged.Which of the following statements is CORRECT?

• A) The required return on Stock A will increase by less than the increase in the market risk premium, while the required return on Stock C will increase by more than the increase in the market risk premium.
• B) The required return on the average stock will remain unchanged, but the returns of riskier stocks (such as Stock C)will increase while the returns of safer stocks (such as Stock A)will decrease.
• C) The required returns on all three stocks will increase by the amount of the increase in the market risk premium.
• D) The required return on the average stock will remain unchanged, but the returns on riskier stocks (such as Stock C)will decrease while the returns on safer stocks (such as Stock A)will increase.
• E) The required return of all stocks will remain unchanged since there was no change in their betas.

Recognize the importance of environmental factors and community infrastructure in disease prevention.

Understand the historical development of public health initiatives and their impact on community health.

Analyze the role of government and non-governmental organizations in the advancement of public health.

Identify key figures and their contributions to public health and nursing.

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Definitions:

Lower Self-Esteem

A condition where an individual holds a diminished or negative view of their own worth or abilities.

Common Identity

A shared sense of belonging or identity among members of a group, community, or culture that unites them and distinguishes them from others.

Common Bond

A shared connection or interest that unites members of a group or community.

Entitativity

The degree to which a group is perceived as being a coherent, unified entity.