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nikki1992 nikki1992
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10 months ago
Assume that the risk-free rate, rRF, declines but the market risk premium, (rM– rRF) increases, with the net effect being that the overall required return on the market, rM, remains constant. Which of the following statements is correct?


▸

The required return of all stocks will decrease by the amount of the decrease in the risk-free rate.



▸

The required return will increase for stocks that have a beta less than 1.0 but will decline for stocks that have a beta greater than 1.0.



▸

The required return will decline for stocks that have a beta less than 1.0 but increase for stocks that have a beta greater than 1.0.



▸

Since the overall return on the market stays constant, the required return on each individual stock will remain constant.

Textbook 
Financial Management: Theory and Practice

Financial Management: Theory and Practice


Edition: 4th
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iffn23iffn23
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