Stock A has a beta coefficient (?) equal to 2.1, and Stock B has a beta coefficient (?) equal to 0.7. According to the capital asset pricing model (CAPM), which of the following statements is correct?
A. The required rate of return for Stock A, rA, should be 2.1 times the required rate of return for Stock B, rB.
B. The risk premium associated with Stock A, RPA, should be 2.1 times the risk premium associated with Stock B, RPB.
C. The required rate of return for Stock A, rA, should be three times the required rate of return for Stock B, rB.
D. The risk premium associated with Stock A, RPA, should be three times the risk premium associated with Stock B, RPB.
E. The required rate of return for Stock A, rA, should be three times the risk premium associated with Stock A, RPA.
Answer: D
You might also like to view...
The growth stage of a product's life cycle is a period of rapid market acceptance and substantial profit improvement
Indicate whether the statement is true or false
When a specified behavior is no longer rewarded or punished every time but rewarded or punished on a more random basis, it is which type of schedule of reinforcement?
A. variable-interval B. variable-ratio C. partial D. continuous
Sales discounts and allowances include:
a. allowances for unsatisfactory merchandise. b. discounts for prompt payment. c. allowances for satisfactory merchandise. d. interest charges for late payment. e. choices a and b.
Sales tax payable is a liability account that is debited when payment of tax is made to the taxing authority
Indicate whether the statement is true or false