Gretta's Portfolio Consists of $700,000 Invested in a Stock That

Multiple Choice

Gretta's portfolio consists of $700,000 invested in a stock that has a beta of 1.2 and $300,000 invested in a stock that has a beta of 0.8. The risk-free rate is 6% and the market risk premium is 5%. Which of the following statements is CORRECT?

A) the required return on the market is 10%.
B) the portfolio's required return is less than 11%.
C) if the risk-free rate remains unchanged but the market risk premium increases by 2%, gretta's portfolio's required return will increase by more than 2%.
D) if the market risk premium remains unchanged but expected inflation increases by 2%, gretta's portfolio's required return will increase by more than 2%.
E) if the stock market is efficient, gretta's portfolio's expected return should equal the expected return on the market, which is 11%.