Table 8.3
Consider the following two securities X and Y.
-________ in the beta coefficient normally causes ________ in the required return and therefore ________ in the price of the stock, all else remaining the same.
A) An increase; an increase; an increase
B) An increase; a decrease; an increase
C) An increase; an increase; a decrease
D) A decrease; a decrease; a decrease

Question

Table 8.3
Consider the following two securities X and Y. 
-________ in the beta coefficient normally causes ________ in the required return and therefore ________ in the price of the stock, all else remaining the same.
A) An increase; an increase; an increase 
B) An increase; a decrease; an increase 
C) An increase; an increase; a decrease 
D) A decrease; a decrease; a decrease

Quizplus · Accepted Answer

An increase in the beta coefficient indicates higher risk, leading to an increase in the required return. This higher required return results in a decrease in the stock price, assuming all other factors remain constant.

Table 8.3 Consider the Following Two Securities X and Y