You Own Two Risky Assets, Both of Which Plot on the Security

question 4

Multiple Choice

You own two risky assets, both of which plot on the security market line. Asset A has an expected return of 12% and a beta of 0.8. Asset B has an expected return of 18% and a beta of 1.4. If your
Portfolio beta is the same as the market portfolio, what proportion of your funds are invested in
Asset A?

• A) 0.33
• B) 0.50
• C) 0.67
• D) 1.33
• E) 1.67

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Definitions:

Common Costs

Expenses that cannot be directly attributed to a specific product or service but are shared among several projects or business units.

Strategic Business Unit

A division or unit within a company that has its own mission, objectives, and competitors, and is managed independently.

Revenue Centre

A segment or area of a business responsible for generating sales and revenue, without direct responsibility for profit or cost.

Investment Centre

A business unit or division within an organization that is responsible for generating its own revenues and managing its own investments and expenses.