Which of the following statements is CORRECT? A) The slope of the Security Market Line is beta. B) Any stock with a negative beta must in theory have a negative required rate of return, provided r_RF is positive. C) If a stock's beta doubles, its required rate of return must also double. D) If a stock's returns are negatively correlated with returns on most other stocks, the stock's beta will be negative. E) If a stock has a beta of to 1.0, its required rate of return will be unaffected by changes in the market risk premium.

Question

Quizplus · Accepted Answer

The correct statement is D, which says that if a stock's returns are negatively correlated with returns on most other stocks, the stock's beta will be negative. Beta measures the sensitivity of a stock's returns to the returns of the market. A negative beta indicates that the stock moves in the opposite direction of the market.

Which of the Following Statements Is CORRECT