An Investor Divides Her Portfolio into Thirds, with One Part

question 52

Multiple Choice

An investor divides her portfolio into thirds, with one part in Treasury bills, one part in a market index, and one part in a diversified portfolio with Beta of 1.50.What is the Beta of the investor's overall portfolio?

• A)0.833
• B)1.000
• C)1.167
• D)1.250

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Definitions:

Output Units

The quantity of goods or services produced by a company or an economy.

Allocative Inefficiency

Occurs when resources in an economy are not allocated optimally, leading to outcomes where it is possible to improve someone's well-being without worsening others'.

Profit-Maximizing

A strategy or process employed by businesses to determine the price and output level that generates the most profit.

Monopoly

A market structure characterized by (1) a single seller of a well-defined product for which there are no good substitutes and (2) high barriers to the entry of any other firms into the market for that product.