An Increase in Nondiversifiable Risk

Multiple Choice

An increase in nondiversifiable risk

A) would cause an increase in the beta and would increase the required return.
B) would cause an increase in the beta and would lower the required return.
C) would have no effect on the beta and would, therefore, cause no change in the required return.
D) would cause a decrease in the beta and would, therefore, lower the required rate of return.