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5 Other things held constant, (1) if the expected inflation tate decreases, and (2) investors become more risk averse, the Security Market Line would shift a. Down and have steeper slope. b. Up and have less steep slope. c. Up and keep same slope. d. Down and keep same slope. c. Down and have less steep slope. Beta coefficient 6 Given the following information, determine which beta coefficient for Stock A is consistent with equilibrium: kA=11.3%;kgkm=5%;kMM=10% a, 0.86 b. 1.26 c. 1.10 d. 0.80 e. 1.35 Beta coefficient 7 Assume that the risk-free rate is 5 percent, and that the market risk premium is 7 percent. If a stock has a required rate of return of 13.75 percent, what is its beta? a. 1.25 b. 1.35 c. 1.37 d. 1.60 e. 1.96 Portfolio beta 8 You hold a diversified portfolio consisting of a $5,000 investment in each of 20 different common stocks. The portfolio beta is equal to 1.15. You have decided to sell one of your stocks, a lead mining stock whose b is equal to 1.0 , for $5,000 net and to use the proceeds to buy $5,000 of stock in a steel company whose b is equal to 2.0. What will be the new beta of the portfolio? a. 1.12 b. 1.20 c. 1.22 d. 1.10 e. 1.15