If a change in the investment environment leads to an increase in the Risk-Free Rate while the Return on the Market Portfolio remains constant, then: The Expected Return on Low Beta Stocks should increase. The Expected Return on Low Beta Stocks should decrease. The Expected Return on Low Beta Stocks should remain unchanged. Cannot be determined. None of the above answers is correct. If a change in the investment environment leads to an increase in the Risk-Free Rate while the Return on the Market Portfolio remains constant, then: The Expected Return on High Beta Stocks should increase. The Expected Return on High Beta Stocks should decrease. The Expected Return on High Beta Stocks should remain unchanged. Cannot be determined. None of the above answers is correct.
If a change in the investment environment leads to an increase in the Risk-Free Rate while the Return on the Market Portfolio remains constant, then: The Expected Return on Low Beta Stocks should increase. The Expected Return on Low Beta Stocks should decrease. The Expected Return on Low Beta Stocks should remain unchanged. Cannot be determined. None of the above answers is correct. If a change in the investment environment leads to an increase in the Risk-Free Rate while the Return on the Market Portfolio remains constant, then: The Expected Return on High Beta Stocks should increase. The Expected Return on High Beta Stocks should decrease. The Expected Return on High Beta Stocks should remain unchanged. Cannot be determined. None of the above answers is correct.
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Transcribed Image Text:If a change in the investment environment leads to an increase in the Risk-Free Rate while the Return on the
Market Portfolio remains constant, then:
The Expected Return on Low Beta Stocks should increase.
The Expected Return on Low Beta Stocks should decrease.
The Expected Return on Low Beta Stocks should remain unchanged.
Cannot be determined.
None of the above answers is correct.
If a change in the investment environment leads to an increase in the Risk-Free Rate while the Return on the
Market Portfolio remains constant, then:
The Expected Return on High Beta Stocks should increase.
The Expected Return on High Beta Stocks should decrease.
The Expected Return on High Beta Stocks should remain unchanged.
Cannot be determined.
None of the above answers is correct.
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for your explaination on the second one, i think you mean the answer is B. as you stated it will result into decrease of expected return if stock
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