Finance 8 - The return on "the market" will...

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14.  Which of the following statements is CORRECT? A)  Lower beta stocks have higher required returns. B)  A stock's beta indicates its company-specific risk. C)  The slope of the security market line is measured by beta. D)  Two securities with the same stand-alone risk will have the same betas. E)  Company-specific risk cannot be diversified away. Points Earned:  5.0/5.0  Correct Answer(s): C 15.  Assume that the risk-free rate remains constant, but that the market risk premium declines. Which of the following is likely to occur? A)  The required return on a stock with a beta < 1.0 will decline. B)  The required return on a stock with a beta 1.0 will increase. C)  The required return on a stock with a beta = 1.0 will remain the same. D) 
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Unformatted text preview: The return on "the market" will increase. E) The return on "the market" will remain constant. Points Earned: 5.0/5.0 Correct Answer(s): A 16. Which of the following statements is CORRECT? A) If a stock's returns are negatively correlated with returns on most other stocks, the stock's beta will be negative. B) If a stock's beta doubles, its required rate of return must double. C) If a stock has a beta equal to 1.0, its required rate of return will be unaffected by changes in the market risk premium. D) The slope of the security market line is beta. E) A stock with a negative beta must in theory have a negative required rate of return. Points Earned: 0.0/5.0 Correct Answer(s): A...
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This note was uploaded on 11/05/2009 for the course BUS FIN 2100 taught by Professor Shmidl during the Spring '09 term at Laramie County Community College.

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Finance 8 - The return on "the market" will...

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