Assume the risk-free rate and the market risk premium are both positive.Trevor currently owns a portfolio consisting of risky and risk-free securities.The portfolio has an expected return of 11.2 percent,a standard deviation of 16.2 percent,and a beta of 1.21.He has decided that he would prefer a higher expected return.Which one of these actions should he take?

Question

Quizplus · Accepted Answer

To achieve a higher expected return, Trevor should increase the weight of the risky assets in his portfolio. This is because risky assets typically offer higher expected returns than risk-free securities. Option D directly addresses this by suggesting an increase in the portfolio weight of the risky assets, which would increase the overall expected return of the portfolio without changing its total value.

Assume the Risk-Free Rate and the Market Risk Premium Are