Suppose the beta coefficient of a stock doubles from 1 1 to 2 2 Logic says that the required rate of return on the stock should also double Is this logic correct Explain ...

False The amount of the risk premium changes by the amount ...

Suppose the beta coefficient of a stock doubles from 1 = 1 to 2 =

Question:

Suppose the beta coefficient of a stock doubles from β₁ = 1 to β₂ = 2. Logic says that the required rate of return on the stock should also double. Is this logic correct? Explain.

Beta Coefficient
Beta coefficient is a measure of sensitivity of a company's stock price to movement in the broad market index. It is an indicator of a stock's systematic risk which is the undiversifiable risk inherent in the whole financial system. Beta coefficient...