Assume that the risk-free rate is 5%. Which of the following statements is CORRECT?

A. If a stock's beta doubled, its required return under the CAPM would also double.
B. If a stock's beta doubled, its required return under the CAPM would more than double.
C. If a stock's beta were 1.0, its required return under the CAPM would be 5%.
D. If a stock's beta were less than 1.0, its required return under the CAPM would be less than 5%.
E. If a stock has a negative beta, its required return under the CAPM would be less than 5%.


Answer: E

Business

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