Suppose that in recent years both expected inflation and

Reference no: EM13477217

Assume that in recent years both expected inflation and the market risk premium (rM-rRF) have declined. Assume also that all stocks have positive betas. Which of the following would be most likely to have occurred as a result of these changes?

a. The average required return on the market, rM, has remained constant, but the required returns have fallen for stocks that have betas greater than 1.0.

b. The required returns on all stocks have fallen by the same amount.

c. The required returns on all stocks have fallen, but the fall has been greater for stocks with higher betas.

d. The required returns on all stocks have fallen, but the decline has been greater for stocks with lower betas.

e. Required returns have increased for stocks with betas greater than 1.0 but have declined for stocks with betas less than 1.0.

Reference no: EM13477217

Questions Cloud

By how much does the required return on the riskier stock : stock r has a beta of 1.5 stock s has a beta of 0.60 the expected rate of return on an average stock is 9 and the

Scheuer enterprises consists of a beta of 110 the real : scheuer enterprises has a beta of 1.10 the real risk-free rate is 2.00 investors expect a 3.00 future inflation rate

As a supervisor you had frequently been making routine : you have just been promoted from front-line supervisor to be one of the firms senior managers. during your business

You now receive another 500 million which you invest in : assume that you manage a 10.00 million mutual fund that has a beta of 1.05 and a 9.50 required return. the risk-free

Suppose that in recent years both expected inflation and : assume that in recent years both expected inflation and the market risk premium rm-rrf have declined. assume also that

Compute the dollar cost of each of proposed plans for : raymond manufacturing faces a liquidity crisis - it needs a loan of 100000 for 1 month. having no source of additional

After winning major championships star players often : 1.after winning major championships star players often complain about their lack of endorsement offers. similarly after

Compute amount of resources required to support firms cash : american products is concerned about managing cash efficiently. on the average inventories have an age of 90 days and

Develop a team web page where virtual team members can : recommendations on managing virtual teamsbulldevelop a team web page where virtual team members can share information

User Account

All Pages