You Form a Portfolio by Investing Equally in a (Beta

question 354

Multiple Choice

You form a portfolio by investing equally in A (beta = 0.8) , B (beta = 1.2) , the risk-free asset, and the market portfolio. What is your portfolio beta?

• A) 0.67
• B) 0.75
• C) 0.95
• D) 1.12
• E) 1.15

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Definitions:

Preferred Dividends

Payments made to preferred shareholders, typically fixed in amount or percentage, that are prioritized over dividends to common shareholders.

Inventory Increase

An upward adjustment in the book value of inventory, indicating a rise in the number of goods or materials on hand.

Noncash Investing

Transactions involving investment activities that do not involve immediate cash flows, such as exchanging one asset for another.

Financing Activities

Transactions that result in changes in the size and composition of the equity capital or borrowings of the entity, such as issuing shares or taking loans.