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

Question

Quizplus · Accepted Answer

The correct statement is E, 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