Assume That the Risk-Free Rate Remains Constant, but the Market

Assume that the risk-free rate remains constant, but the market risk premium declines. Which of the following is most likely to occurσ

A) the required return on a stock with beta > 1.0 will increase.
B) the return on "the market" will remain constant.
C) the return on "the market" will increase.
D) the required return on a stock with beta < 1.0 will decline.
E) the required return on a stock with beta = 1.0 will not change.

Correct Answer:

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