1. Stock H has a beta of 1.8, while Stock L has a beta of 0.4. If investors’ aversion to risk increased...
a. the risk premium of Stock H would increase by more. 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 premiums of Stock H and L would increase by the same amount.
2. Suppose rRF = 5.6%, rM = 9.8%, and bJ = 1.3. What is rJ, the required rate of return on Stock J?
a. 5.46% b. 12.74% c. 18.34% d. 11.06% e. 16.70%