Stock a Has a Beta of 0

question 31

Multiple Choice

Stock A has a beta of 0.7,whereas Stock B has a beta of 1.3.Portfolio P has 50% invested in both A and B.Which of the following would occur if the market risk premium increased by 1%? (Assume that the risk-free rate remains constant.)

• A)The required return on Portfolio P would increase by 1%.
• B)The required return on both stocks would increase by 1%.
• C)The required return on Portfolio P would remain unchanged.
• D)The required return on Stock A would increase by more than 1%, while the return on Stock B would increase by less than 1%.

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Definitions:

Per Person Expenditures

The average amount of money spent by or on behalf of an individual, often used in contexts such as healthcare, education, and public services.

Health Care

The maintenance or improvement of health via the prevention, diagnosis, treatment, recovery, or cure of illness, injury, and other physical and mental impairments in people.

Brown V. Board

Reference to the landmark 1954 U.S. Supreme Court decision, Brown v. Board of Education, that declared state laws establishing separate public schools for black and white students to be unconstitutional.

Unconstitutional

Actions or laws that are not in accordance with the constitution.