You Want Your Portfolio Beta to Be 1

question 17

Multiple Choice

You want your portfolio beta to be 1.10. Currently, your portfolio consists of $3,000 invested in stock A with a beta of 1.65 and $2,000 in stock B with a beta of .72. You have another $5,000 to invest
And want to divide it between an asset with a beta of 1.48 and a risk-free asset. How much should
You invest in the risk-free asset?

• A) $0
• B) $775
• C) $1,885
• D) $3,115
• E) $5,000

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Definitions:

Favorable Variances

Differences between actual and budgeted or standard cost figures that are financially beneficial to a company.

Unfavorable Variances

Differences where actual results are worse than expected, often leading to higher costs or lower revenues.

Raw Materials Inventory

The total cost of all the raw materials that are used in the manufacturing process but have not yet been converted into finished goods.

Raw Materials Purchase

The procurement of unprocessed materials used in the manufacturing or production of finished goods.