What Is the Portfolio Beta with 125% of Your Funds

question 256

Multiple Choice

What is the portfolio beta with 125% of your funds invested in the market portfolio via borrowing 25% of the funds at the risk-free interest rate?

• A) 0.25
• B) 0.50
• C) 0.75
• D) 1.00
• E) 1.25

---

Definitions:

Aggregate Supply

The overall quantity of products and services that companies in a country's economy intend to sell over a set duration.

Wealth Effect

The change in consumer spending and economic behavior that results from a change in perceived wealth, often due to asset price fluctuations.

Real Balances Effect

The change in consumption and savings behavior resulting from an alteration in purchasing power due to inflation or deflation.

Financial Assets

Economic resources or ownership rights that are intangible and represent a claim to future payments, such as stocks, bonds, or bank deposits.