Stock a Has a Beta of 0

Multiple Choice

Stock A has a beta of 0.7, whereas Stock B has a beta of 1.3.Portfolio P has 50% invested in both A and B.Which of the following would occur if the market risk premium increased by 1% but the risk-free rate remained constant?

A) The required return on both stocks would increase by 1%.
B) The required return on Portfolio P would remain unchanged.
C) The required return on Stock A would increase by more than 1%, while the return on Stock B would increase by less than 1%.
D) The required return for Stock A would fall, but the required return for Stock B would increase.
E) The required return on Portfolio P would increase by 1%.