__________in the beta coefficient normally causes __________in the required return and therefore __________in the price of the stock, all else remaining the same.

Question

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- An increase in interest rates will increase the cost of borrowing for companies, which in turn can decrease their profitability and reduce investor demand for their stock, thus causing a decrease in the price of the stock. This is the first part of the scenario in the question.
- An increase in corporate tax rates will lower the after-tax earnings of companies and reduce investor demand for their stock, thus causing a decrease in the price of the stock. This is the second part of the scenario in the question.
- A decrease in inflation will generally strengthen the purchasing power of the currency and increase investor confidence in the economy and the stock market, thus causing an increase in the price of the stock. However, this effect may not be strong enough to overcome the negative effects of the first two factors stated above, hence resulting in a decrease in the price of the stock overall. This is the third part of the scenario in the question.

__________In the Beta Coefficient Normally Causes __________In the Required Return

In the Beta Coefficient Normally Causes In the Required Return