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Suppose that Federal Reserve actions have caused a decrease in the risk - free rate, IRF. Meanwhile, the market risk premium, ( rM - (
Suppose that Federal Reserve actions have caused a decrease in the riskfree rate, IRF. Meanwhile, the market risk premium, rM RF has decreased as well. Under these conditions, with other things held constant, which of the following statements is most correct?
a
The required return on all stocks would increase, but the increase would be greatest for stocks with betas of less than
b
Stocks' required returns would change, but so would expected returns, and the result would be no change in stocks' prices.
The prices of all stocks would decline, but the decline would be greatest for highbeta stocks.
d The prices of all stocks would increase, but the percent changes in stock prices would be greatest for highbeta stocks.
e The prices of all stocks would increase, but the percent changes in stock prices would be greatest for lowbeta stocks.
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