A well diversified investor invests into a share that has lower standard deviation and higher beta compared to its current portfolio. What is going to be the impact of this investment on the reqired return of the new portfolio?

Select one:

We do not have a concluion about the required return, only the risks of the portfolio will increase.

The required rate of return unchanged as the standard deviation and the beta average out eachother.

The required rate of return increases as the portfolio has higher exposure to common risks.

The required rate of return decreases as the portfolio has lower exposure to common risks.