Question 14 3 pts Toby has his entire retirement account invested in shares of H

Question

Question 14 3 pts Toby has his entire retirement account invested in shares of Hoboken Inc. Currently his portfolio has a beta of 2.6 and an expected return of 17% per year. If Toby reallocates half of his portfolio into shares of Bronzier Corp, which has significantly less systematic risk than Hoboken, what is most likely to happen to his overall portfolio risk and return? @ Risk will decrease: Return will increase O Risk will increase; Return will decrease Risk will increase; Return will increase O Risk will decrease: Return will decrease

Explanation / Answer

Answer:

Option D is the answer.

Risk will decrease, Return will decrease

Explanation:-

Less systematic risk means risk decreased because systematic risk includes the market risk and interest rate risk etc... If you choosing less systematic risk means you are decreasing risk factor.

Then risk and return will positively correlated.

That means when you have more risk then only you will get more return , if you have less risk or low risk then you will get less return that implies return will decrease.

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