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:

Ordinary Holder

An entity or individual that possesses a negotiable instrument but does not necessarily have the rights of a holder in due course.

Rights

Entitlements or privileges granted to individuals, which are protected by law or social convention.

Assets

Economic resources or valuable items that are owned by an individual or business and are expected to provide future benefits.

Negotiation

The process by which two or more parties communicate back and forth for the purpose of reaching a joint agreement about differing needs or ideas.