Stock a Has a Beta = 0

question 36

Multiple Choice

Stock A has a beta = 0.8,while Stock B has a beta = 1.6.Which of the following statements is correct?

• A)Stock B's required return is double that of Stock A's.
• B)If the marginal investor becomes more risk averse, the required return on Stock B will increase by more than the required return on Stock A.
• C)An equally weighted portfolio of Stocks A and B will have a beta lower than 1.2.
• D)If the risk-free rate increases but the market risk premium remains constant, the required return on Stock A will increase by more than that on Stock B.

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Definitions:

Erythropoietin

A hormone produced by the kidneys that stimulates red blood cell production in response to low oxygen levels in the body's tissues.

Fibrinogen Inactivator

An enzyme or agent that inhibits the function of fibrinogen, a protein necessary for blood clot formation.

Thrombin

An enzyme in blood plasma that causes the clotting of blood by converting fibrinogen to fibrin, an essential step in hemostasis.

Platelet Formation

The process of creating platelets, which are small blood cells that play a critical role in blood clotting and wound healing, from the fragmentation of megakaryocytes.