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26.

Which of the following statements is CORRECT? (Assume that the risk-free rate is a constant.)

a. If the market risk premium increases by 1%, then the required return will increase for stocks that have a beta greater than 1.0, but it will decrease for stocks that have a beta less than 1.0.
b. The effect of a change in the market risk premium depends on the level of the risk-free rate.
c. If the market risk premium increases by 1%, then the required return will increase by 1% for a stock that has a beta of 1.0.
d. The effect of a change in the market risk premium depends on the slope of the yield curve.
e. If the market risk premium increases by 1%, then the required return on all stocks will rise by 1%

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Jarrod Robel
Jarrod RobelLv2
28 Sep 2019

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A stock has a required return of 9%; the risk-free rate is 4%; and the market risk premium is 3%. What is the stock's beta? Round your answer to two decimal places. If the market risk premium increased to 7%, what would happen to the stock's required rate of return? Assume that the risk-free rate and the beta remain unchanged. If the stock's beta is equal to 1.0, then the change in required rate of return will be less than the change in the market risk premium. If the stock's beta is greater than 1.0, then the change in required rate of return will be greater than the change in the market risk premium. If the stock's beta is less than 1.0, then the change in required rate of return will be greater than the change in the market risk premium. If the stock's beta is greater than 1.0, then the change in required rate of return will be less than the change in the market risk premium. If the stock's beta is equal to 1.0, then the change in required rate of return will be greater than the change in the market risk premium. New stock's required rate of return will be %. Round your answer to two decimal places.

stock has a required return of 12%; the risk-free rate is 3.5%; and the market risk premium is 6%. What is the stock's beta? Round to two decimal places.

If the market risk premium increased to 7%, what would happen to the stock's required rate of return? Assume the risk-free rate and the beta remain unchanged.

A) If the stock's beta is equal to 1.0, then the change in required rate of return will be less than the change in the market risk premium.

B) If the stock's beta is greater than 1.0, then the change in required rate of return will be greater than the change in the market risk premium.

C)If the stock's beta is less than 1.0, then the change in required rate of return will be greater than the change in the market risk premium.

D)If the stock's beta is greater than 1.0, then the change in required rate of return will be less than the change in the market risk premium.

E)If the stock's beta is equal to 1.0, then the change in required rate of return will be greater than the change in the market risk premium.

What will the new stock's required rate of return will be %. Round to two decimal places.

A stock has a required return of 16%; the risk-free rate is 5.0%; and the market risk premium is 3%.

a. What is the stock's beta? Round your answer to two decimal places.

b. If the market risk premium increased to 7%, what would happen to the stock's required rate of return? Assume the risk-free rate and the beta remain unchanged.
-Select--Select-IIIIIIIVVItem 2
I. If the stock's beta is equal to 1.0, then the change in required rate of return will be greater than the change in the market risk premium.
II. If the stock's beta is equal to 1.0, then the change in required rate of return will be less than the change in the market risk premium.
III. If the stock's beta is greater than 1.0, then the change in required rate of return will be greater than the change in the market risk premium.
IV. If the stock's beta is less than 1.0, then the change in required rate of return will be greater than the change in the market risk premium.
V. If the stock's beta is greater than 1.0, then the change in required rate of return will be less than the change in the market risk premium.

c. If the beta changed to 2, what would happen to the stock's required rate of return? Assume the risk-free rate and the market risk premium remain unchanged. Round your answer to two decimal places.

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