Assume that the risk-free rate remains constant, but the market risk premium declines. Which of the following is most likely to occur? a. The required return on a stock with beta = 1.0 will not change. b. The required return on a stock with beta > 1.0 will increase. c. The return on "the market" will increase. d. The return on "the market" will remain constant. e. The required return on a stock with a positive beta < 1.0 will decline.

Assume that the risk-free rate remains constant, but the market risk premium declines. Which of the following is most likely to occur? a. The required return on a stock with beta = 1.0 will not change. b. The required return on a stock with beta > 1.0 will increase. c. The return on "the market" will increase. d. The return on "the market" will remain constant. e. The required return on a stock with a positive beta < 1.0 will decline.

Corporate Fin Focused Approach

5th Edition

ISBN:9781285660516

Author:EHRHARDT

Publisher:EHRHARDT

Chapter6: Risk And Return

Section: Chapter Questions

Problem 14P

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