A Portfolio of Securities Has a Beta of 1

question 76

Multiple Choice

A portfolio of securities has a beta of 1.14. Given this, you know that:

• A)adding another security to the portfolio must lower the portfolio beta.
• B)the portfolio has more risk than a risk-free asset but less risk than the market.
• C)each of the securities in the portfolio has more risk than an average security.
• D)the portfolio has 14% more risk than a risk-free security.
• E)the expected return on the portfolio is greater than the expected market return.

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Definitions:

Replenishes

Refers to the process of filling up or restoring inventory or supplies to their optimal levels.

Optimal

The most favorable condition or level of efficiency that a system, selection, or outcome can achieve under given constraints.

Collection Float

The time interval between when a payment is deposited and when funds become available in the company’s account, affecting cash flow.

Cheques

Written, dated and signed instruments that direct a bank to pay a specific sum of money to the bearer.