Stock XYZ Has a Beta of 1

question 84

Multiple Choice

Stock XYZ has a beta of 1.2 and an expected return of 14%; the risk-free asset (T-bills) currentlyearns 4%. What is the expected return on a portfolio if 50% of your money is invested in Stock XYZand 50% in T-bills?

• A) 8%
• B) 18%
• C) 9%
• D) 14%

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Definitions:

Investing Activities

Transactions involving the purchase or sale of long-term assets and other investments not considered cash equivalents, usually reflected in the cash flow statement of a company.

Cash Dividends

Payments made by a corporation to its shareholders, usually in the form of cash, out of its profits or reserves.

Payable

Refers to an amount of money that a company owes to its creditors or suppliers, to be paid at a later date.

Accounts Receivable

Money owed to a business by its customers for goods or services delivered on credit.