Respuesta :
In given portfolio, replacing the existing investment with lower beta investment results in decrease in required rate of return of portfolio.
What is portfolio?
A portfolio is any collection of the financial assets, including cash, bonds, and the stocks. Individual investors have the option of managing their own portfolios, or they can have them managed by financial professionals, hedge funds, banks, and other financial institutions. The investor's investing objectives, time horizon, and risk tolerance should all be taken into consideration when building a portfolio. This idea is widely recognised. The monetary worth of each asset may have an impact on the risk/reward ratio of the portfolio. Maximizing expected return and reducing risk are the two main objectives of asset allocation. This is an example of a multi-objective optimization problem; there are many viable solutions, and the optimal one must be selected by balancing the trade-off between risk and reward.
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