Nile Food's stock has a beta of 1.4, while Elba Eateries' stock has a beta of 0.7. Assume that the risk-free rate, rRF, is 5.5% and the market risk premium, (rM – rRF), equals 4%. Which of the following statements is CORRECT?

Complete question:

Nile Food's stock has a beta of 1.4, while Elba Eateries' stock has a beta of 0.7.  Assume that the risk-free rate, rRF, is 5.5% and the market risk premium, (rM− rRF), equals 4%.  Which of the following statements is CORRECT?

a.If the risk-free rate increases but the market risk premium remains unchanged, the required return will increase for both stocks but the increase will be larger for Nile since it has a higher beta.

b.If the market risk premium increases but the risk-free rate remains unchanged, Nile's required return will increase because it has a beta greater than 1.0 but Elba's required return will decline because it has a beta less than 1.0.

c.Since Nile's beta is twice that of Elba's, its required rate of return will also be twice that of Elba's.

d.If the risk-free rate increases while the market risk premium remains constant, then the required return on an average stock will increase.

e.If the market risk premium decreases but the risk-free rate remains unchanged, Nile's required return will decrease because it has a beta greater than 1.0 and Elba's will also decrease, but by more than Nile's because it has a beta less than 1.0

Option D, If the risk-free rate increases while the market risk premium remains constant, then the required return on an average stock will increase.

Explanation:

The risk-free return return rate is the estimated return rate of such an zero-risk investment. The risk-free rate reflects an investor's value that a guaranteed risk-free investment would assume over a given period of time.

The increased risk-free limit contributes to a decline in capital costs, even if there is still a steady market risk premium. The calculation below clearly shows that the rise in the free rate of risk has a direct impact on the expected equity return.

well, you would divide 135 by 33 to get your answer. then that is how many seconds it would take. boardman should fly about 132 m or 4.090909090909091 seconds.

what experimental evidence led scientists to change from the previous model to this one?

a few of the positive particles aimed at a gold foil seemed to bounce back.

the colors of light emitted from heated atoms had very specific energies.

experiments with water vapor showed that elements combine in specific proportions.

cathode rays were bent in the same way whenever a magnet was brought near them.