Stock A has a beta of 1.2 and a standard deviation of returns of 18%.

Stock A has a beta of 1.2 and a standard deviation of returns of 18%. Stock B has a beta of 1.8 and a
standard deviation of returns of 18%. If the market risk premium increases, then

A) the required returns on stocks A and B will both increase by the same amount.
B) the required return on stock A will increase more than the required return on stock B.
C) the required returns on stocks A and B will remain the same.
D) the required return on stock B will increase more than the required return on stock A.

ANSWER

D