An investor is building a portfolio by investing $50,000 in stock A, which has a beta of 1.50, and $25,000 in stock B, which has a beta of 0.90. The market risk premium is equal to 6% and Treasury bonds have a yield of 4%. What is the required rate of return on the investor's portfolio?

Continuation of the previous question. Assume that the predicted rate of return (expected rate of return) for Portfolio AB is 10%. Compare the required rate of return with Portfolio AB's predicted rate of return, which of the following statements is most correct?

a. The portfolio must be sold.

b. The portfolio has a lower expected return than the average stock.

C. The portfolio is not paying dividends.

d. The portfolio is experiencing supernormal growth.

e. The wallet is a good purchase.