How might a small market risk premium impact people's desire to buy stocks? a. It will...
How might a small market risk premium impact people's desire to buy stocks?
a. It will only impact the share prices.
b. Investors with high risk aversion will be more willing to invest in stocks.
c. None of these statements is a correct answer.
d. Investors with high risk aversion will be less willing to invest in stocks.
Homework Answers
Option d is correct
Investors with high risk aversion will be less willing to invest in stocks if small risk premium on stocks
Investors with high risk aversion will be more willing to invest in stocks if large risk premium on stocks
Since the risk averse investors will be more interested in investing lower return stock with known risks apart from the higher returns from unknown risks
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How might a
small market risk premium impact people's desire to buy
stocks?
a. It will...
Required return on Stock = Risk-free return + (Market risk premium)(Stock's beta) to compensate the investor...
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iii. In the years ahead the market risk premium, (km - krF), is expected to fall,...
iii. In the years ahead the market risk premium, (km - krF), is expected to fall, while the risk-free rate, kry, is expected to remain at current levels. Given this forecast, which of the following statements is most correct? a. The required return for all stocks will fall by the same amount. b. The required return will fall for all stocks but will fall more for stocks with higher betas. c. The required return will fall for all stocks but...
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answer all
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Required return on Stock = Risk-free return + (Market risk premium)(Stock's beta) to compensate the investor for risk. If a stock's expected return plots below the SM If a stock's expected return plots on or above the SML, then the stock's return is -Select- the stock's return is -Select- to compensate the investor for risk. The SML line can change due to expected inflation and risk aversion. If inflation changes, then the SML plotted on a graph will shift up...
iii. In the years ahead the market risk premium, (km - krF), is expected to fall, while the risk-free rate, kry, is expected to remain at current levels. Given this forecast, which of the following statements is most correct? a. The required return for all stocks will fall by the same amount. b. The required return will fall for all stocks but will fall more for stocks with higher betas. c. The required return will fall for all stocks but...
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answer all
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