Question
Stock Q has a beta ( b) equal to 1.6 and Stock P has a beta equal to 0.8. Based on this information, according to
Stock Q has a beta ( b) equal to 1.6 and Stock P has a beta equal to 0.8. Based on this information, according to the capital asset pricing model (CAPM), which of the following statements is correct?
| The required rate of return for Stock Q, rQ, should be 1.6 times greater than the required rate of return for Stock P, rP. | ||
| The risk premium associated with Stock Q, RPQ, should be 1.6 times greater than the risk premium associated with Stock P, RPP. | ||
| The required rate of return for Stock Q, rQ, should be two times greater than the required rate of return for Stock P, rP. | ||
| The risk premium associated with Stock Q, RPQ, should be two times greater than the risk premium associated with Stock P, RPP. | ||
| None of the above is a correct answer. |
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Finance For Executives Managing For Value Creation
Authors: Gabriel Hawawini, Claude Viallet
7th Edition
1473778913, 978-1473778917
