Question: Stock A has a beta = 1 . 6 , while Stock B has a beta = 0 . 8 . Which of the following

Stock A has a beta =1.6, while Stock B has a beta =0.8. Which of the following statements is correct?
Question 1Answer
a.
If the marginal investor becomes more risk averse, the required return on Stock B will increase by more than the required return on Stock A.
b.
If the risk-free rate increases but the market risk premium remains constant, the required return on Stock B will increase by more than that on Stock A.
c.
Stock As required return is double that of Stock B.
d.
An equally weighted portfolio of Stocks A and B will have a beta of 1.2.

Step by Step Solution

There are 3 Steps involved in it

1 Expert Approved Answer
Step: 1 Unlock blur-text-image
Question Has Been Solved by an Expert!

Get step-by-step solutions from verified subject matter experts

Step: 2 Unlock
Step: 3 Unlock

Students Have Also Explored These Related Finance Questions!

Q:

A corporation with a December 31st year-end begins its operations on July 1st, 2018. It has acquired $50,000 of Class 8 assets on this date. The maximum CCA for its fiscal year ending December 31st,...

Q:

Parmacheenee Belle's entire common stock portfolio ($500,000) is allotted to an index fund tracking the Standard & Poors 500 index. The expected rate of return on the index is 9.5% and the standard...

Q:

5. The internal rate of return for a project will increase if: a. The total amount of the cash inflows is reduced b. Each cash inflow is moved such that it occurs one year later than originally...

Q:

Suppose you manage a $4.75 million fund that consists of four stocks with the following investments: Stock Investment Beta A $220,000 1.50 B 600,000 -0.50 C 980,000 1.25 D 2,950,000 0.75 If the...

Q:

PVIDED BEO0 PART B: MULTIPLE CHOICE. USE THE ANSWER SHEET 1. Consider an investor who welcomes above-average portfolio risk. Which of the following statements (a) The investor is likely to be...

Q:

please show work Portfolio risk and return 1. Stock A and Stock B each have an expected return of 12 percent, a beta of 1.2 , and a standard deviation of 25 percent. The returns on the two stocks...

Q:

1. A Treasury bond has an 8% annual coupon and a 7.5% yield to maturity. Which of the following statements is CORRECT? a. The bond sells at a price below par. b. The bond has a current yield greater...

Q:

Xxv/xxvi/xxvii Help figure this out Thxq xov. For the foreseeable future, the real risk-free rate of interest, k is expected to remain at 3 percent innation is expected to steadily increase over...

Q:

FINA2201/Final 8. Five years ago Constellation, Inc, sold an issue of 20-year $1000 par bonds to finance a new distribution terminal. The bonds pay 7.0% APR, semi-annually. Today's required rate of...

Q:

Here is the question Question 3 1 pts Lewis & Associates stock has an expected return of 10.2 percent, the risk-free rate is 4.5 percent, and the market risk-premium is 7.5 percent. What must be the...

Q:

Assuming that w is constant (perhaps the potassium channels are jammed in a particular state) and a = 0.3, figure out the dynamics of (Equation 5.8.4) thought of as a one-dimensional differential...

Q:

Why does the recorded amount of interest expense for the first interest payment differ from the expense recorded for other interest payments when bonds are issued between interest payment dates?

Q:

A not - for - profit organization is exempt from reporting which of the following contributed services as revenue? A . A CPA prepares the organization's tax return.

Q:

Pharoah Company reported the following amounts for 2022: Raw materials purchased $95,200 Beginning raw materials inventory 5,824 Ending raw materials inventory 5,040 Beginning finished goods...