Assume That the Risk-Free Rate Is 6% and the Market

Multiple Choice

Assume that the risk-free rate is 6% and the market risk premium is 5%. Given this information, which of the following statements is CORRECTσ

A) if a stock has a negative beta, its required return must also be negative.
B) an index fund with beta = 1.0 should have a required return less than 11%.
C) if a stock's beta doubles, its required return must also double.
D) an index fund with beta = 1.0 should have a required return greater than 11%.
E) an index fund with beta = 1.0 should have a required return of 11%.