You Would Like to Combine a Risky Share with a Beta

question 45

Multiple Choice

You would like to combine a risky share with a beta of 1.5 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)25%
• B)33%
• C)50%
• D)67%
• E)75%

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Definitions:

Marginal Tax Rate

The rate at which an additional dollar of income is taxed, reflecting the percentage of each additional dollar that is paid in tax.

Transfer Payments

Payments made by the government to individuals, without the government receiving any goods or services in return, such as welfare payments and social security benefits.

Exhaustive

Thorough and comprehensive in approach or scope.

Deficit Spending

The practice of a government spending more money than it receives in revenue, typically funded through borrowing.