You Own a Portfolio Equally Invested in a Risk-Free Asset

question 42

Multiple Choice

You own a portfolio equally invested in a risk-free asset and two stocks.One of the stocks has a beta of 1.9 and the total portfolio is equally as risky as the market.What is the beta of the second stock?

• A)0.75
• B)0.80
• C)0.94
• D)1.00
• E)1.10

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Definitions:

Measurement

The process of quantifying qualitative financial data in monetary terms through various accounting methods.

Going Concern Assumption

The assumption that the entity will continue to operate for the foreseeable future.

Historical Costs

The original monetary value at which an asset was bought or a liability was incurred.

Liquidation

The process of closing a business, selling its assets, and using the proceeds to pay creditors, with any leftovers distributed to shareholders.