Assume the Risk-Free Rate and the Market Risk Premium Are

Multiple Choice

Assume the risk-free rate and the market risk premium are both positive.Trevor currently owns a portfolio comprised of risky and risk-free securities.The portfolio has an expected return of 11.2 percent,a standard deviation of 16.2 percent,and a beta of 1.21.He has decided that he would prefer a higher expected return.Which one of these actions should he take?

A) Replace a stock in his current portfolio with a beta of 1.34 with a stock that has a 1.02 beta
B) Sell a portion of the risky assets and use the proceeds to purchase risk-free securities
C) Lower both the portfolio standard deviation and beta
D) Increase the portfolio weight of the risky assets without affecting the total portfolio value
E) Increase the standard deviation of the portfolio without affecting the portfolio beta