You Want Your Portfolio Beta to Be 1

question 10

Multiple Choice

You want your portfolio beta to be 1.20. Currently, your portfolio consists of $100 invested in stock A with a beta of 1.4 and $300 in stock B with a beta of.6. You have another $400 to invest and want to divide it between an asset with a beta of 1.6 and a risk-free asset. How much should you invest in the risk-free asset?

• A) $0
• B) $140
• C) $200
• D) $320

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Definitions:

Joint Operators

The parties to a joint operation.

Expenses

Decreases in assets or increases in liabilities, that result in decreases in equity, other than those relating to distributions to holders of equity claims.

Cash Balance

The amount of cash held by a company in its financial accounts at a specific point in time, reflecting its immediate liquidity position.

Creditors

Entities or individuals to whom a company owes money, due to the provision of goods, services, or loans.