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In an Efficient Market,the Cost of Equity for a Risky

Question 10

Multiple Choice

In an efficient market,the cost of equity for a risky firm does which one of the following according to the security market line?


A) Produces a return that will be less than the market rate but higher than the risk-free rate
B) Equals the market rate of return for all stocks
C) Has a maximum cost equal to the market rate of return
D) Decreases as the beta of the firm's stock increases
E) Increases in direct relation to the stock's systematic risk

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