Stock H has a beta of 1.6, while Stock L has a beta of 0.7. If investors’ aversion to risk increased... a. the risk premiums of Stock H and L would increase by the same amount. b. the risk premium of Stock L would increase by more. c. the risk premiums of Stock H and L would remain unchanged. d. the risk premium of Stock H would increase by more.

Stock H has a beta of 1.6, while Stock L has a beta of 0.7. If investors’ aversion to risk increased... a. the risk premiums of Stock H and L would increase by the same amount. b. the risk premium of Stock L would increase by more. c. the risk premiums of Stock H and L would remain unchanged. d. the risk premium of Stock H would increase by more.

Corporate Fin Focused Approach

5th Edition

ISBN:9781285660516

Author:EHRHARDT

Publisher:EHRHARDT

Chapter6: Risk And Return

Section: Chapter Questions

Problem 14P

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Question

Stock H has a beta of 1.6, while Stock L has a beta of 0.7. If investors’ aversion to risk increased...

	a.	the risk premiums of Stock H and L would increase by the same amount.
	b.	the risk premium of Stock L would increase by more.
	c.	the risk premiums of Stock H and L would remain unchanged.
	d.	the risk premium of Stock H would increase by more.

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