What Happens to the Expected Portfolio Return If the Portfolio

question 7

Multiple Choice

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%.

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Definitions:

Legitimate Power

Authority that is accepted as a normal part of a social role.

Referent Power

Social influence that occurs because individuals seek to be liked and accepted by valued social groups.

Emotional Appeal

A persuasive technique that targets the emotions rather than logic or reason to influence an audience’s response or behavior.

One-sided

Information or arguments presented from a single perspective without acknowledgment or consideration of alternate viewpoints.