Quiz Ch 08 – Effects of Market Risk Premium Change on Required Returns

Fundamentals of Financial Management, Concise

Brigham and Houston

09th Edition

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Given that Stock A has a beta of 0.8, Stock B has a beta of 1.0, and Stock C has a beta of 1.2, and Portfolio P has equal investments in each of these stocks, all with a standard deviation of 25%, and their returns are uncorrelated, what statement accurately describes the effects of an increase in the market risk premium while the risk-free rate remains constant?

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