Hold a Portfolio Consisting of a $5,000 Investment in Each

question 5

Multiple Choice

hold a portfolio consisting of a $5,000 investment in each of 20 different stocksThe portfolio beta is equal to 1.12 You have decided to sell a coal mining stock (b = 1.00) at $5,000 net and use the proceeds to buy a like amount of a mineral rights company stock (b = 2.00) What is the new beta of the portfolio?

• A) 1.1139
• B) 1.1700
• C) 1.2311
• D) 1.2927
• E) 1.3573

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Definitions:

Predetermined Overhead Rate

A rate calculated before a period begins, based on the estimated cost of manufacturing overhead and an allocation base, used to assign overhead costs to products.

Direct Labour-hours

The total time spent by workers who are directly involved in the manufacturing or assembly of a company’s products.

Cost of Goods Sold

The total cost directly attributed to the production of goods that were sold, including materials, labor, and overhead.

Overapplied Overhead

A situation where the overhead allocated to products or services is more than the actual overhead costs incurred.