Using the Capital Asset Pricing Model (CAPM), an increase in the security's beta will increase the expected rate of return on an individual security. Assume that the security's beta, the risk-free rate of return, and the market rate of return are all positive.

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According to the CAPM formula, the expected return on a security is equal to the risk-free rate plus the product of the security's beta and the market risk premium (the difference between the market return and the risk-free rate). An increase in the security's beta, which measures its volatility relative to the market, would increase the product of the beta and the market risk premium, thereby increasing the expected return on the security.

Using the Capital Asset Pricing Model (CAPM), an Increase in the Security's