Suppose You Held a Well-Diversified Portfolio with a Very Large $\sigma$

question 52

Multiple Choice

Suppose you held a well-diversified portfolio with a very large number of securities, and that the single index model holds.If the $\sigma$ of your portfolio was 0.22 and $\sigma$ _M was 0.19, the $\beta$ of the portfolio would be approximately

• A)1.34.
• B)1.16.
• C)1.25.
• D)1.56.

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Definitions:

Interest Rate

The fraction of a loan incurred as interest by the borrower, often depicted as an annual percentage of the outstanding loan amount.

Capital Flight

The rapid movement of large sums of money out of a country, typically to escape economic instability or unfavorable investment conditions.

Domestic Investment

The total capital expenditure within a country's borders on physical assets such as buildings, machinery, and equipment, contributing to the national economy.

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The value of a country's total exports minus the value of its total imports. It is a key component in calculating a nation's GDP.