You Have a $9,000 Portfolio Which Is Invested in Stocks

question 200

Multiple Choice

You have a $9,000 portfolio which is invested in stocks A, B, and a risk-free asset. $4,000 is invested in stock A. Stock A has a beta of 1.84 and stock B has a beta of 0.68. How much needs to be invested in stock B if you want a portfolio beta of.95?

• A) $0
• B) $1,750
• C) $3,279
• D) $5,000

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Definitions:

Equipment

Tangible property used in operations, such as machinery and hardware, that contribute to the production or service of a business.

Inventory

A company's merchandise, raw materials, and finished and unfinished products which have not yet been sold; considered an asset on the balance sheet.

Book Value

The net asset value of a company calculated as total assets minus intangible assets and liabilities.

Net Income

The residual income a company has after expenses and taxes are deducted from its total income.