What happens to the expected portfolio return if the portfolio beta increases from 1.0 to 1.5,the risk-free rate decreases from 5 to 4%,and the market risk premium increases from 8 to 9%?
A) It increases from 12 to 14.0%.
B) It increases from 13 to 17.5%.
C) It increases from 12 to 12.5%.
D) It increases from 13 to 13.5%.

Question

Quizplus · Accepted Answer

r_p = 5% + 1(8) = 13%; r_p = 4% + 1.5(9) = 17.5%

What Happens to the Expected Portfolio Return If the Portfolio