6. Assume that the risk-free rate is 5%. Which of the following statements is CO
ID: 2356614 • Letter: 6
Question
6. Assume that the risk-free rate is 5%. Which of the following statements is CORRECT? A If a stock has a negative beta, its required return under the CAPM would be less than 5%. B If a stock's beta doubled, its required return under the CAPM would also double. C If a stock's beta doubled, its required return under the CAPM would more than double. D If a stock's beta were 1.0, its required return under the CAPM would be 5%. E If a stock's beta were less than 1.0, its required return under the CAPM would be less than 5%.Explanation / Answer
Assume that the risk-free rate is 5%. Which of the following statements is CORRECT?
A If a stock has a negative beta, its required return under the CAPM would be less than 5%.-correct answer
B If a stock's beta doubled, its required return under the CAPM would also double. C If a stock's beta doubled, its required return under the CAPM would more than double. D If a stock's beta were 1.0, its required return under the CAPM would be 5%. E If a stock's beta were less than 1.0, its required return under the CAPM would be less than 5%.