You have a portfolio consisting of equal amounts of Royal Bank stock and Treasury bills. If you replace half of the Treasury bills with more Royal Bank stock, the portfolio expected return will likely ___________, all else the same.
A) Increase.
B) Decrease.
C) Remain unchanged.
D) Either increase or decrease.
E) Decrease if IBM is considered a small-cap stock.

Question

Quizplus · Accepted Answer

Replacing half of the Treasury bills, which typically have lower returns but are safer investments, with more Royal Bank stock, which likely has a higher expected return but comes with higher risk, would increase the portfolio's expected return.

You Have a Portfolio Consisting of Equal Amounts of Royal