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Sergio [31]
3 years ago
10

If an investor's aversion to risk increased, would the risk premium on a high beta stock increase by more or less than that of a

low-beta stock? Explain.
Business
1 answer:
8_murik_8 [283]3 years ago
8 0

Answer:

risk premium increases by more of the low - beta stock

A risk averse investor is an investor that avoids risk. if risk aversion increases, it means that the investor is more wary of risky investment.

Beta measures the volatility of a portfolio. the higher the volatility, the more risky the portfolio is.

risk premium measures the rate of return in excess of the risk free rate.

According to CAPM :

risk free rate + (beta x stock risk premium)

Beta is a multiplier of stock risk premium, so the higher the beta, the more there would be an increase in the stock risk premium

If a risk averse investor invests in a high beta stock, he would want extra or higher compensation for holding such a volatile stock. this extra compensation would be in the form of a higher risk premium.

Explanation:

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2 years ago
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Work performance information and cost forecasts are the main outputs of cost control.

<h3 /><h3>What is cost control?</h3>

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In a company, cost control will help in effective positioning in the short and long term, helping to correctly understand the company's financial situation in a period, in addition to helping in the forecast of costs, expectations and planning as a whole.

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3 0
1 year ago
Which of the following is true about development? Group of answer choices It involves the movement, over generations, of the bul
leonid [27]

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Explanation:

Development involves the movement, over generations, of the bulk of jobs from agriculture to manufacturing and service industries. Technology is also influenced by technological change.

The least developed countries have most of their populations employed in the primary sector like agriculture and haven't completed the transition from manufacturing to services and have not yet entered the information age.

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3 years ago
3:Leo's rent is due a few days before he expects to receive his paycheck from work. He takes out a
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2 years ago
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A. Set meters is the correct answer.

Explanation:

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