If investors’ aversion to risk increased, would the risk premium on a high-beta stockincrease by more or less than that on a low-beta stock? Explain.
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If investors’ aversion to risk increased, would the risk premium on a high-beta stock
increase by more or less than that on a low-beta stock? Explain.
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- If investors’ aversion to risk increased, would the risk premium on a high-beta stock increase by more or less than that on a low-beta stock?What is risk aversion, and how is risk aversion related to the expected return on a stock?If investors’ aversion to risk increased, would the risk premium on a high-beta stock increase more or less than that on a low-beta stock? Furthermore, If a company’s beta were to double, would its expected return double? Explain in detail.
- What is a characteristic line? How is this line used to estimate a stocks beta coefficient? Write out and explain the formula that relates total risk, market risk, and diversifiable risk.The additional return over the risk-free rate needed to compensate investors for assuming an average amount of risk. a. Market Risk Premium b. Risk-free rate С. Stock's beta O d. Security Market Line e. Required Return on StockWhich of the following stocks have the highest systematic risk? A. A stock with a high correlation to the market and a low return volatility. B. A stock with a low correlation to the market and a high return volatility. C. A stock with a high correlation to the market and high return volatility. D. A stock with a low correlation to the market and a low return volatility.
- What is the difference between a diversifiable riskand a nondiversifiable risk? Should stock portfoliomanagers try to eliminate both types of risk?Which of the following statements about 'beta' is correct? Is a measure of stand-alone risk. A low beta means that a stock is more volatile than the market Is a measure of a stock's volatility relative to the market. OA high beta means that a stock is less volatile than the market1. Beta is positively related A. the degree of correlation between a stock's return and the market return B. the systematic risk of a stock C. risk premium required by the stock D. all of the above
- If Stock A has a lower expected return than Stock B, which of the following statements is least likely? Stock A has more specific risk. Stock B plots below the security market line. Stock A has a higher beta. Stock B is a cyclical stock.What is a characteristic line? How is this line usedto estimate a stock’s beta coefficient? Write outand explain the formula that relates total risk,market risk, and diversifiable riskStock A has more systematic risk than stock B, stock B has more unsystematic risk than stock A, and it is unclear which stock (A or B) has more total risk. Both stock A and stock B have more systematic risk than the market. Which of the following assertions is most consistent with finance theory? Stock B would have a higher expected return than stock A and stock A would have a higher expected return than the market Stock A would have a higher expected return than stock B and stock A would have a higher expected return than the market Stock B would have a higher expected return than stock A and the market would have a higher expected return than stock A Stock A would have a higher expected return than stock B and the market would have a higher expected return than stock A Because it is unclear which stock (A or B) has more total risk, it is unclear which stock (A or B) would have a higher expected return