Which of the Following Statements Is Correct

question 61

Multiple Choice

Which of the following statements is correct?

• A)If a company's beta doubles, then its required rate of return will also double.
• B)Other things held constant, if investors suddenly became convinced that there would be deflation in the economy, then the required returns on all stocks should increase.
• C)If a company's beta were cut in half, then its required rate of return would also be halved.
• D)If the risk-free rate rises by 0.5% but the market risk premium declines by that same amount, then the required rates of return on an average stock will remain unchanged, but required returns on stocks with betas less than 1.0 will rise.

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Definitions:

Quotas

Limits set by governments on the quantity of a specific good that can be imported or exported during a particular time frame.

Tariff

A tax imposed on imported goods, designed to protect domestic industries by making foreign products more expensive.

Domestic Price

The cost of goods or services within a country’s borders, as opposed to international or foreign prices.

Quantity Demanded

The total amount of a good or service that consumers are willing to purchase at a given price over a specific time period.