The Risk-Free Rate Is 6%;Stock a Has a Beta of 1.0;Stock

question 34

Multiple Choice

The risk-free rate is 6%;Stock A has a beta of 1.0;Stock B has a beta of 2.0;and the market risk premium,r_M - r_RF,is positive.Which of the following statements is CORRECT?

• A) If the risk-free rate increases but the market risk premium stays unchanged,Stock B's required return will increase by more than Stock A's.
• B) Stock B's required rate of return is twice that of Stock A.
• C) If Stock A's required return is 11%,then the market risk premium is 5%.
• D) If Stock B's required return is 11%,then the market risk premium is 5%.
• E) If the risk-free rate remains constant but the market risk premium increases,Stock A's required return will increase by more than Stock B's.

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Definitions:

Essential-trait Approach

A theory in personality psychology focusing on identifying a core set of traits that significantly describe and predict an individual's personality.

Single-trait Approach

A method in personality research that focuses on how one particular trait affects behavior.

Many-trait Approach

A method in personality psychology that examines the relationships between a wide array of personality traits and behaviors or outcomes, seeking to understand how multiple traits come together to form the individual.

Typological Approach

A methodological stance in psychology that classifies individuals into distinct types based on shared characteristics, often used in personality, developmental, and social psychology.