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Part $1$

$($Security market$$ line$)$Your father just learned from his financial advisor that his retirement portfolio has a beta of $1\mathrm{.}83.$ He has turned to you to explain to him what this means. $$ Specifically, describe what you would expect to happen to the value of his retirement fund if the following were to$$ occur:

a$.$The value of the market portfolio rises by $8$ percent.

b$.$The value of the market portfolio drops by $8$ percent.

c$.$Is your$$ father's retirement portfolio more or less risky than the market$$ portfolio? Explain.

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Part $1$

a$.$If the value of the market portfolio rises by $8\%,$ then the value of your$$ father's retirement fund should

$$

decrease

increase

by

$$

enter your response here$\%.($Select from the$$ drop$-$down menu and round the answer to two decimal$$ places.$)$

Part $2$

b$.$If the value of the market portfolio drops by $8\%,$ then the value of your$$ father's retirement fund should

$$

increase

decrease

by

$$

enter your response here$\%.($Select from the$$ drop$-$down menu and round the answer to two decimal$$ places.$)$

Part $3$

c$.$ Your$$ father's retirement portfolio is

$$

less

more

risky than the market portfolio because your$$ father's retirement portfolio$$ beta, $$ it's systematic$$ risk, is

$$

greater

less

than the$$ market's portfolio beta.$($Select from the$$ drop$-$down menus.$)$