From the list below, the letter of the statement most appropriate for how a chan

Question

From the list below, the letter of the statement most appropriate for how a change in the risk-free interest rate alters the required return is ______. Similarly, the letter of the statement most appropriate for how a change in the public's aversion to risk alters the required return is ______. A. It has no effect on required return. B. It results in the same change in required return, regardless of the level of beta. C. It causes a greater change in required return for high beta stocks than for those with low beta. D. It causes a greater change in required return for low beta stocks than for those with high beta. E. It has the opposite effect on required return for high beta stocks than it does for those with low beta.

Explanation / Answer

C. It causes a greater change in required return for high beta stocks than for those with low beta.

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