Portfolio P has equal amounts invested in each of the three stocks, A, B, and C. Stock A has a beta of 0.8, Stock B has

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Portfolio P has equal amounts invested in each of the threestocks, A, B, and C. Stock A has a beta of 0.8, Stock B has a betaof 1.0, and Stock C has a beta of 1.2. Each of the stocks has astandard deviation of 25%. The returns on the three stocks areindependent of one another (i.e., the correlation coefficients allequal zero). Assume that there is an increase in the market riskpremium, but the risk-free rate remains unchanged. Which of thefollowing statements is CORRECT?
a. The required return of all stocks will remain unchanged sincethere was no change in their betas.b. The required returns on all three stocks will increase by theamount of the increase in the market risk premium.c. The required return on Stock A will increase by less than theincrease in the market risk premium, while the required return onStock C will increase by more than the increase in the market riskpremium.d. The required return on the average stock will remain unchanged,but the returns of riskier stocks (such as Stock C) will increasewhile the returns of safer stocks (such as Stock A) willdecrease.e. The required return on the average stock will remain unchanged,but the returns on riskier stocks (such as Stock C) will decreasewhile the returns on safer stocks (such as Stock A) willincrease.