Stock LB has a beta of 0.5 and Stock HB has a beta of 1.5. The market is in equilibrium, with required returns equaling expected returns. Which of the following statements is NOT CORRECT?

a) If expected inflation remains constant but the market risk premium (rM - (RE)

increases, the stock price of HB will decrease more than the stock price of LB

b) If both stocks face the same changes in the expected inflation while the market risk premium (rM - frF) does not change, the required returns of be stocks will increase by the same amount.

c) If expected inflation remains constant but the market risk premium (rm - declines, the required return of Stock HB will decline but the required ret of Stock LB will increase.

d) Since the market is in equilibrium, the required returns of the two stock should depend on the beta: the higher beta means higher required retu

e) If both expected inflation and the market risk premium (rm - fRF) incre: the required return on Stock HB will increase by more than that on