Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Assume that the risk free rate is 6% and the market risk premium is 5%. Given this information, which of the following statements is correct?

Assume that the risk free rate is 6% and the market risk premium is 5%. Given this information, which of the following statements is correct?

A. If a stocks beta doubles, its required return must also double

B. An index fund with beta = 1.0 should have a required return less than 11%.

C. An index fund with beta = 1.0 should have a required return of 11%.

D. If a stock has a negative beta, its required return must also be negative.

E. An index fund with beta = 1.0 should have a required return greater than 11%.

Step by Step Solution

3.47 Rating (154 Votes )

There are 3 Steps involved in it

Step: 1

C An index fu... blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Auditing and Assurance Services

Authors: Timothy Louwers, Robert Ramsay, David Sinason, Jerry Straws

6th edition

978-1259197109, 77632281, 77862341, 1259197107, 9780077632281, 978-0077862343

More Books

Students also viewed these Economics questions