Finance 8 - E) 7.06% 0.00 Points Earned: 0.0/5.0 Correct...

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4.  The returns of United Railroad Inc. (URI) are listed below, along with the returns on "the market":   Year URI     Market       1 -14% -9%   2 16    11      3 22    15      4 7    5      5 -2    -1    If the risk-free rate is 9% and the required return on URI's stock is 15%, what is the required return on the market? (Hint: Think rise over run.) A)  4% B)  16% C)  9% D)  10% E)  13% Points Earned:  5.0/5.0  Correct Answer(s): E 5.  Using The Wall Street Journal for "good value" stocks, you have calculated expected returns for five stocks. Assume the risk-free rate is 7% and the market risk premium is 2%. Which security would be the best investment? (Assume you must choose just one.) Expected Return Beta A)  5.04% -0.67 B)  8.74% 0.87 C)  11.50% 2.50 D)  9.01% 1.70
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Unformatted text preview: E) 7.06% 0.00 Points Earned: 0.0/5.0 Correct Answer(s): E 6. Which of the following statements is CORRECT? A) If a company's beta doubles, then its required rate of return will also double. B) If a company's beta is cut in half, then its required rate of return will also be halved. C) If the risk-free rate rises by 0.5% but the market risk premium declines by that same amount, then the required rates of return on stocks with betas less than average will decline while returns on stocks with above average betas will increase. D) Other things held constant, if investors suddenly became convinced that there would be deflation in the economy, then the required returns on all stocks should decrease. E) If investors became more risk averse, then the slope of the security market line should decrease....
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Finance 8 - E) 7.06% 0.00 Points Earned: 0.0/5.0 Correct...

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