You Would Like to Combine a Risky Stock with a Beta

question 112

Multiple Choice

You would like to combine a risky stock with a beta of 1.68 with U.S. 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) .32
• B) .40
• C) .50
• D) .60
• E) .68

---

Definitions:

Concurrent Validity

Evidence that test scores are related to an external source that can be measured at around the same time the test is being given (“here and now” validity). This is a type of criterion-related validity.

Predictive Validity

The extent to which a test score or instrument can predict the performance or outcomes on relevant future measures.

Criterion-related Validity

A measure of how well one variable or test predicts an outcome based on information from other variables.

Psychotic Tendencies

Propensities or inclinations towards experiencing psychosis, characterized by a disconnection from reality, often involving delusions or hallucinations.