Assume that the risk-free rate is 5%. Which of the following statements is CORRECTσ
A) if a stock's beta doubled, its required return under the capm would also double.
B) if a stock's beta doubled, its required return under the capm would more than double.
C) if a stock's beta were 1.0, its required return under the capm would be 5%.
D) if a stock's beta were less than 1.0, its required return under the capm would be less than 5%.
E) if a stock has a negative beta, its required return under the capm would be less than 5%.

Question

Quizplus · Accepted Answer

A negative beta indicates that the stock moves inversely to the market, suggesting a required return lower than the risk-free rate of 5% under the CAPM.

Assume That the Risk-Free Rate Is 5