What Is the Portfolio Beta If 75% of Your Money

question 106

Multiple Choice

What is the portfolio beta if 75% of your money is invested in the market portfolio, and the remainder is invested in a risk-free asset?

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

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Definitions:

EBIT-EPS Line

A graphical representation showing the impact of financial leverage on a company's earnings per share at various levels of earnings before interest and taxes.

Financial Leverage

The use of borrowed funds to increase the potential return on investment, often measured by the ratio of a company's debt to its equity.

Financial Risk

The possibility of losing money on an investment or business venture; includes market risk, credit risk, liquidity risk, and operational risk, among others.

Shareholders

Individuals or entities that own shares in a corporation, granting them rights to dividends and a say in company affairs proportional to their shareholding.