A Portfolio Contains Four Assets

question 65

Multiple Choice

A portfolio contains four assets.Asset 1 has a beta of .8 and comprises 30% of the portfolio.Asset 2 has a beta of 1.1 and comprises 30% of the portfolio.Asset 3 has a beta of 1.5 and comprises 20% of
The portfolio.Asset 4 has a beta of 1.6 and comprises the remaining 20% of the portfolio.If the
Riskless rate is expected to be 3% and the market risk premium is 6%, what is the beta of the
Portfolio?

• A)0.80
• B)1.10
• C)1.19
• D)1.25
• E)1.40

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Definitions:

Double-Declining-Balance

A method of accelerated depreciation which doubles the rate at which an asset depreciates compared to the straight-line depreciation method.

Depreciation

The allocation of the cost of a tangible asset over its useful life, reflecting the decrease in value over time due to usage, wear and tear, or obsolescence.

Accumulated Depreciation

The total depreciation amount that has been charged against a fixed asset's cost over its useful life to reflect wear and tear.

Equipment

Tangible property owned by a business used in operations, such as machinery, vehicles, or computers.