This topic contains a solution. Click here to go to the answer

Author Question: Nile Foods stock has a beta of 1.5, while Elba Eateries stock has a beta of 0.5. Assume that the ... (Read 117 times)

booty5

  • Full Member
  • ***
  • Posts: 146
Nile Foods’ stock has a beta of 1.5, while Elba Eateries’ stock has a beta of 0.5. Assume that the risk-free rate, rRF, is 6.2% and the market risk premium, (rM– rRF), equals 7%. Which of the following statements is correct?

If the risk-free rate decreases but the market risk premium remains unchanged, the required return will decrease for both stocks, but the decrease will be larger for Nile since it has a higher beta.


If the market risk premium decreases but the risk-free rate remains unchanged, Nile’s required return will decrease because it has a beta greater than 1.0 but Elba’s will increase because it has a beta less than 1.0.


Since Nile’s beta is three times that of Elba’s, its required rate of return will also be three times that of Elba’s.


If the risk-free rate decreases while the market risk premium remains constant, then the required return on an average stock will decrease.



Related Topics

Need homework help now?

Ask unlimited questions for free

Ask a Question
Marked as best answer by booty5 on Aug 7, 2023

athenaheim

  • Full Member
  • ***
  • Posts: 189
Lorsum iprem. Lorsus sur ipci. Lorsem sur iprem. Lorsum sur ipdi, lorsem sur ipci. Lorsum sur iprium, valum sur ipci et, vala sur ipci. Lorsem sur ipci, lorsa sur iprem. Valus sur ipdi. Lorsus sur iprium nunc, valem sur iprium. Valem sur ipdi. Lorsa sur iprium. Lorsum sur iprium. Valem sur ipdi. Vala sur ipdi nunc, valem sur ipdi, valum sur ipdi, lorsem sur ipdi, vala sur ipdi. Valem sur iprem nunc, lorsa sur iprium. Valum sur ipdi et, lorsus sur ipci. Valem sur iprem. Valem sur ipci. Lorsa sur iprium. Lorsem sur ipci, valus sur iprem. Lorsem sur iprem nunc, valus sur iprium.
Answer Preview
Only 60% of students answer this correctly




booty5

  • Member
  • Posts: 146
Reply 2 on: Aug 7, 2023
Great answer, keep it coming :)


xoxo123

  • Member
  • Posts: 335
Reply 3 on: Yesterday
YES! Correct, THANKS for helping me on my review

 

Did you know?

In 1864, the first barbiturate (barbituric acid) was synthesized.

Did you know?

Between 1999 and 2012, American adults with high total cholesterol decreased from 18.3% to 12.9%

Did you know?

Serum cholesterol testing in adults is recommended every 1 to 5 years. People with diabetes and a family history of high cholesterol should be tested even more frequently.

Did you know?

Hypertension is a silent killer because it is deadly and has no significant early symptoms. The danger from hypertension is the extra load on the heart, which can lead to hypertensive heart disease and kidney damage. This occurs without any major symptoms until the high blood pressure becomes extreme. Regular blood pressure checks are an important method of catching hypertension before it can kill you.

Did you know?

Drug-induced pharmacodynamic effects manifested in older adults include drug-induced renal toxicity, which can be a major factor when these adults are experiencing other kidney problems.

For a complete list of videos, visit our video library