Dana Has a Portfolio of 8 Securities, Each with a Market

question 6

Multiple Choice

Dana has a portfolio of 8 securities, each with a market value of $5,000. The current beta of the portfolio is 1.28, and the beta of the riskiest security is 1.75. Dana wishes to reduce her portfolio beta to 1.15 by selling the riskiest security and replacing it with another security with a lower beta. What must be the beta of the replacement security?

• A) 1.21
• B) 0.91
• C) 0.73
• D) 1.62

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Definitions:

Strike Leverage

The advantage or power that workers and unions have to negotiate with employers, typically derived from the ability to halt or disrupt normal business operations through strikes.

Initial Proposals

The first set of terms and conditions put forward by one party during a negotiation process.

Bargaining

The process of negotiating the terms of employment between an employer and a group of employees or their representatives.

Pattern Bargaining

A labor negotiation strategy where unions use the outcome of one successful negotiation as a model or "pattern" for subsequent negotiations with other employers.