The risk-free rate is 7% and the market risk premium is 8%. Your $1 million portfolio consists of $600,000 invested in a stock that has a beta of 1.5 and $400,000 invested in a stock that has a beta of 0.9. Which of the following statements is correct?
a. The required return on the market is 12%.
b. The portfolio’s required return is greater than 15%.
c. If the risk-free rate remains unchanged but the market risk premium increases by 3%, your portfolio’s required return will increase by less than 3%.
d. If the stock market is efficient, your portfolio’s expected return should equal the expected return on the market, which is 15%.