Grace Has One Risk-Free Asset and One Risky Stock in Her

question 67

Multiple Choice

Grace has one risk-free asset and one risky stock in her portfolio. The risk-free asset has an expected return of 1.2%. The risky asset has a beta of 1.5 and an expected return of 20.0%. What is the expected return on the portfolio if the portfolio beta is 1.05?

• A)1.2%
• B)8.83%
• C)10.60%
• D)14.36%
• E)20.00%

---

Definitions:

Revaluation Model

An accounting method that allows for the upward or downward adjustment in the carrying amount of an asset to its current fair value, provided it can be measured reliably.

Revaluation Increment

An increase in the book value of an asset to reflect its fair value, often recognized during asset revaluation processes.

Depreciation Charges

Expenses recorded to allocate the cost of tangible assets over their useful lives, reflecting wear and tear, deterioration, or obsolescence.