What Happens to Expected Portfolio Return If the Portfolio Beta

question 50

Multiple Choice

What happens to 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%
• B)It increases from 13% to 17.5%
• C)It increases from 14% to 21%
• D)It remains unchanged R_p = 5% + 1(8)
• = 13%
• R_p = 4% +1.5(9)
• = 17.5%

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