Q$.$ No$.3.$ Currently under consideration is an investment with a beta, $b,$ of $1\mathrm{.}50.$ At this time, the riskfree rate of return, $R_F,$ is $7\%,$ and the return on the market portfolio of assets, $r_m,$ is $10\%.$ You believe that this investment will earn an annual rate of return of $11\%.$

a$.$ If the return on the market portfolio were to increase by $10\%,$ what would you expect to happen to the investment's return? What if the market return were to decline by $10\%?$

b$.$ Use the capital asset pricing model $($CAPM$)$ to find the required return on this investment.

c$.$ On the basis of your calculation in part b$,$ would you recommend this investment? Why or why not?

d$.$ Assume that as a result of investors becoming less risk$-$averse, the market return drops by $1\%$ to $9\%.$ What impact would this change have on your responses in parts $b$ and $c?$