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%.

---

Definitions:

Compounded Monthly

The process of calculating interest on both the initial principal and the accumulated interest from previous periods, with the compounding occurring every month.

Monthly Payments

Monthly payments refer to amounts paid every month over a set period of time to repay a debt or subscription, often used in loans or service agreements.

Compounded Quarterly

The process of calculating interest on both the initial principal and accrued interest from previous periods on a quarterly basis.

Present Value

The present value of a future amount of money or series of cash inflows, based on a certain rate of return.