An investor was expecting a return of 18% on his portfolio with a beta of 1.25 before the market risk premium increased from 8 to 10%. Based on this change, what return should he now expect on the portfolio?

Name: An investor was expecting a return of 18% on his portfolio with a beta of 1.25 before the market risk premium increased from 8 to 10%. Based on this change, what return should he now expect on the portfolio?
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Question

Quizplus · Accepted Answer

E(R) = 18% + 1.25(10% - 8) = 20.5%

An Investor Was Expecting a Return of 18% on His