Decreases in the risk-free rate will reduce:
A)the market risk premium.
B)the stock's risk premium.
C)the stock's Beta.
D)the stock's expected return.

Question

Quizplus · Accepted Answer

Decreases in the risk-free rate will decrease the required return for all stocks, as the risk-free rate is used as a component in the calculation of the cost of equity. Therefore, the expected return on the stock will decrease.

Decreases in the Risk-Free Rate Will Reduce