Question
Which of the following statements is most correct? a. If a portfolio's beta increases from 1.2 to 1.5, its required rate of return will increase
Which of the following statements is most correct?
a. If a portfolio's beta increases from 1.2 to 1.5, its required rate of return will increase by an amount equal to its market risk premium.
b. Higher beta stocks have more company-specific risk, but do not necessarily have more market risk.
c. If beta doubles, the required return doubles.
d. If two stocks have the same standard deviation and the correlation coefficient between the returns of two stocks equals zero, an equally weighted portfolio of the two stocks will have a standard deviation lower than that of individual stocks.
e. If a stock has a negative beta, its required return is negative.
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