Share Q has a beta ( ) .) equal to 1.6 and Share P has a beta equal to 0.8.Based on this information, according to the capital asset pricing model (CAPM) , which of the following statements is correct?
A) The required rate of return for Share Q, rQ, should be 1.6 times greater than the required rate of return for Share P, rP.
B) The risk premium associated with Share Q, RPQ, should be 1.6 times greater than the risk premium associated with Share P, RPP.
C) The required rate of return for Share Q, rQ, should be two times greater than the required rate of return for Share P, rP.
D) The risk premium associated with Share Q, RPQ, should be two times greater than the risk premium associated with Share P, RPP.
E) None of the above is a correct answer.
Correct Answer:
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