Which of the Following Statements Is CORRECT

question 11

Multiple Choice

Which of the following statements is CORRECT?

• A) The slope of the Security Market Line is beta.
• B) Any stock with a negative beta must in theory have a negative required rate of return, provided rRF is positive.
• C) If a stock's beta doubles, its required rate of return must also double.
• D) If a stock's returns are negatively correlated with returns on most other stocks, the stock's beta will be negative.
• E) If a stock has a beta of to 1.0, its required rate of return will be unaffected by changes in the market risk premium.

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Definitions:

Fair Value

The estimated market price of an asset or liability, based on current conditions between knowledgeable, willing parties.

Credit Balance

Occurs when the total amounts of credits in an account exceed the total amounts of debits, often indicating an amount owed to the account holder.

Common Stock

A type of equity security that represents ownership in a corporation, with holders possibly entitled to vote on corporate matters and receive dividends.

Acquisition Transaction

A deal or arrangement where one company takes control of or purchases significant assets or shares of another company, leading to a change in ownership structure.