You Currently Own a Stock Portfolio That Has a Beta

question 65

Multiple Choice

You currently own a stock portfolio that has a beta of 1.2. If you fully hedge your stock portfolio you will effectively change the portfolio's beta to which one of the following?

• A)0
• B)1
• C)1 / 1.2
• D)1.2
• E)1.22

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Definitions:

External Users

Individuals or entities outside of a company who use its financial information to make decisions, such as investors, creditors, and regulatory agencies.

Financial Accounting Information

The collection of financial data and statements that companies use to report their financial performance to external parties.

Creditor

An individual or institution that lends money or extends credit, expecting repayment in the future.

Basic Accounting Equation

The Basic Accounting Equation is the foundational principle of double-entry bookkeeping, stating that Assets = Liabilities + Equity, maintaining the balance of a company's financial statements.