True or false? Explain or qualify as necessary. 

a. Investors demand higher expected rates of return on stocks with more variable rates of return. 

b. The CAPM predicts that a security with a beta of 0 will offer a zero expected return. 

c. An investor who puts $10,000 in Treasury bills and $20,000 in the market portfolio will have a beta of 2.0. 

d. Investors demand higher expected rates of return from stocks with returns that are highly exposed to macroeconomic risks. 

e. Investors demand higher expected rates of return from stocks with returns that are very sensitive to fluctuations in the stock market.

Answer rating: 100% (QA)

a False Investors demand a higher expected rate of return on securities or stocks with high market r... View the full answer