An Investor Was Expecting an 18% Return on His Portfolio

question 29

Multiple Choice

An investor was expecting an 18% return on his portfolio with Beta of 1.25 before the market risk premium increased from 8% to 10%.Based on this change, what return will now be expected on the portfolio?

• A)20.0%
• B)20.5%
• C)22.5%
• D)26.0% Old: 18% = rf + 1.25(8%)
• = r_f + 10.0%
• 8)0% = r_f
• New: Expected return = 8.0% + 1.25(10%)
• = 8)0% + 12.5%

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Definitions:

Graduates

Individuals who have successfully completed a degree program at a college, university, or other educational institution.

Continuing Education

Educational programs aimed at adults who have completed formal schooling, focusing on personal or professional development.

Employed

The state of having paid work or owning a job, implying engagement in activities that generate income.

Conditional Distributions

The probability distribution of a random variable given that another random variable takes on a certain value.