Stock a consists of a beta of 08 and stock b has a beta of

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Stock A has a beta of 0.8 and Stock B has a beta of 1.2. 50% of Portfolio P is invested in Stock A and 50% is invested in Stock B. If the market risk premium (rM-rRF) were to increase but the risk-free rate (rRF) remained constant, which of the following would occur?

a. The required return would increase for Stock B but decrease for Stock A.

b. The required return would decrease by the same amount for both Stock A and Stock B.

c. The required return on Portfolio P would remain unchanged.

d. The required return would increase for both stocks but the increase would be greater for Stock B than for Stock A.

e. The required return would increase for Stock A but decrease for Stock B.

Reference no: EM13477226

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