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.

Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
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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.
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