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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 120 times)

booty5

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on: Aug 7, 2023
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?

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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.


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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.


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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.


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

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Marked as best answer by booty5 on Aug 7, 2023

athenaheim

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Reply #1 on: Aug 7, 2023
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.
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booty5

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Reply 2 on: Aug 7, 2023
Thanks for the timely response, appreciate it

Joy Chen

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Reply 3 on: Yesterday
Great answer, keep it coming :)

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