Stock X Has a Beta of 0

question 118

Multiple Choice

Stock X has a beta of 0.5 and Stock Y has a beta of 1.5.Which of the following statements must be true,according to the CAPM?

• A)Stock Y's return during the coming year will be higher than Stock X's return.
• B)If expected inflation increases but the market risk premium is unchanged, the required returns on the two stocks will increase by the same amount.
• C)Stock Y's return has a higher standard deviation than Stock X.
• D)If the market risk premium declines, but the risk-free rate is unchanged, Stock X will have a larger decline in its required return than will Stock Y.

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Definitions:

Ascomycete

A member of a large group of fungi characterized by the formation of spores in special sac-like structures called asci.

Zygomycete

Members of the Zygomycota, a phylum of fungi, known for their fast-growing molds, reproductive zygosporangia, and life cycles that include both sexual and asexual reproduction.

Basidiomycete

A class of fungi characterized by producing spores on basidia and includes mushrooms, puffballs, and rusts, playing roles in decomposition and nutrient cycling.

Glomeromycete

Glomeromycetes are a group of fungi that form symbiotic relationships with the roots of plants, assisting in nutrient exchange through structures known as arbuscules.