Suppose You Held a Well-Diversified Portfolio with a Very Large

question 60

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 σ of your portfolio was 0.25 and σ_M was 0.21, the β of the portfolio would be approximately ________.

• A) 0.64
• B) 1.19
• C) 1.25
• D) 1.56

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Definitions:

Parasympathetic

Part of the autonomic nervous system responsible for the body's rest and digest response, counteracting the fight or flight system.

Aroused

A state of heightened physiological and psychological activity, including alertness and emotional engagement.

Spinal Cord

A long, thin, tubular bundle of nervous tissue and support cells that extends from the brainstem to the lower back, part of the central nervous system.

Bodily Reflexes

Automatic, involuntary responses of the body to certain stimuli that do not require conscious thought, such as the knee-jerk reflex.