based on the capital asset pricing model, which of the following must increase t

Question

based on the capital asset pricing model, which of the following must increase the expected return of an individual security, all else constant?
a. An increase in the risk level of that security as measured by the standard deviation
b. an increase in the risk free rate given a security beta of 1.42
c. a decrease in the market rate of treturn given a security beta of 1.13
d. a decrease in the market rate of return given a security beta of .78
e. A decrease in the risk free rate given a security beta of 1.06

Explanation / Answer

Expected return=Risk free rate +Beta(Market return-Risk Free Rate) Increase in Risk Free Rate will increase the expected return The answer is B

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