Which One of the Following Portfolios Should Have the Most

question 156

Multiple Choice

Which one of the following portfolios should have the most systematic risk?

• A) 50% invested in Treasury bills and 50% in a market index fund.
• B) 20% invested in Treasury bills and 80% invested in a stock with a beta of.80.
• C) 10% invested in a stock with a beta of 1.0 and 90% invested in a stock with a beta of 1.40.
• D) 100% invested in a mutual fund which mimics the overall market.
• E) 100% invested in Treasury bills.

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Definitions:

Capital Gain

Profit from the sale of property or an investment when the selling price exceeds the purchase price.

Tax Depreciation

An accounting method that allows a taxpayer to allocate the cost of a tangible asset over its useful life, offering tax deductions over this period.

Taxable Income

The portion of income that is subject to taxation, after all deductions, exemptions, and adjustments.

Tax-exempt Bonds

Bonds issued by governmental entities that do not require the owners to pay taxes on the interest earned from these bonds.