What is the sign of the risk premium of a negative-beta stock? Explain. (Assume the risk premium of the market portfolio is positive.)

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Part 1

(Select the best choice below.)

A.

Zerostocks

with a negative beta have zero risk premiums.

B.

Positiveall

stocks must have positive risk premiums.

C.

Indeterminatenot

all negative beta stocks have negative risk premiums.

D.

Negativeassuming

the market risk premium is positive, the risk premium has the same sign as beta.