Home / Questions / Investment in portfolio A has a standard deviation of 9%, whileinvestment in portfolio B h
Investment in portfolio A has a standard deviation of 9%, whileinvestment in portfolio B has a standard deviation of 14%. In orderto tolerate the increased risk, what would you as an investorexpect?
a. A higher expected return for portfolio A.
b. A higher expected return for portfolio B.
c. An equal return for either portfolio A or portfolio B.
d. Avoidance of portfolio B.
The required rate of return for an investment can be calculatedfrom the capital asset pricing model as follows:

a. 
Use only the return on 3month Treasury bills to determine therequired return. 

b. 
Use the beta of the investment to determine the requiredreturn. 

c. 
Use the riskfree rate, plus the investment’s beta times apremium for systematic risk. 

d. 
Use the riskfree rate, plus the investment’s beta times apremium for diversifiable risk. 
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