Select that statement that is most true. A high beta stock will always have high total...
Select that statement that is most true.
A high beta stock will always have high total risk.
The market risk premium is constant
The risk-free rate does not change over time
A high beta stock would be expected to have a high return in "up markets"
Homework Answers
Answer - A high beta stock would be expected to have a high return in "up markets"
Statement 1 is incorrect. Higher beta stocks may have lower total risk. Total risk is denoted by standard deviation.
Statement 2 is incorrect. Market risk premium may change based upon risk free rate as well as higher volatility in the overall market.
Statement 3 is incorrect. Risk free rate is changeable. It can change based on the market conditions.
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