Answered: indicate whether each statement in the…

Intermediate Financial Management (MindTap Course List)

13th Edition

ISBN:9781337395083

Author:Eugene F. Brigham, Phillip R. Daves

Publisher:Eugene F. Brigham, Phillip R. Daves

Chapter2: Risk And Return: Part I

Section: Chapter Questions

Problem 12MC

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All parts are under one questions therefore per your policy they can all be answered.

6. The beta coefficient

A. A stock’s contribution to the market risk of a well-diversified portfolio is called risk. It can be measured by a metric called the beta coefficient, which calculates the degree to which a stock moves with the movements in the market.

B. Based on your understanding of the beta coefficient, indicate whether each statement in the following table is true or false:

Statement	True	False
Stock A’s beta is 1.0; this means that the stock moves in the same direction and magnitude as the market.
A stock that is more volatile than the market will have a beta of more than 1.0.
Higher-beta stocks are expected to have lower required returns.

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