According to the CAPM, for each unit of Beta an asset\'s required rate of return

Question

According to the CAPM, for each unit of Beta an asset's required rate of return increases by the market's risk premium.

Select one:

True

False

An investor's required rate of return for a common stock can be estimated by summing the stock's dividend yield and annual growth rate, assuming the growth rate is constant over time.

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True

False

As the required rate of return of an investment decreases, the market price of the investment decreases.

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True

False

Because most preferred stocks are perpetuities, their value can be determined by dividing the annual dividend by an investor's required return.

Select one:

True

False

Beta is a measurement of the relationship between a security's returns and the general market's returns.

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True

False

Bond prices are inversely related to market interest rates.

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True

False

Convertible bonds are debt securities that can be converted into a firm's stock at a prespecified price.

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True

False

If a bond has a market value that is higher than its par value, then the required return on the bond must be less than the bond's coupon rate.

Select one:

True

False

Explanation / Answer

Expected return = Rf+×Rp

Rf is risk free return

Rp is risk premium

Hence, given statement is True

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