You Would Like to Combine a Risky Stock with a Beta

question 81

Multiple Choice

You would like to combine a risky stock with a beta of 1.8 with Treasury bills in such a way that the risk level of the portfolio is equivalent to the risk level of the overall market. What percentage of the portfolio should be invested in Treasury bills?

• A) 40%
• B) 44%
• C) 52%
• D) 56%
• E) 60%

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Definitions:

Standard Of Care

The degree of caution and concern an ordinary, prudent person should take in specific circumstances, often used as a benchmark in legal and medical fields to assess performance or negligence.

Common Carrier

A carrier that is licensed to provide transportation services to the public.

Strictly Liable

Being legally responsible for damages or loss, irrespective of fault or intent.

Bailment

The transfer of possession of property from one person to another under agreement that the property will be returned or otherwise disposed of according to the terms of the agreement.