Consider an Investor Who Holds a Risky Portfolio That Has

question 56

Multiple Choice

Consider an investor who holds a risky portfolio that has the same risk as the market portfolio. If the beta is one then the investor should expect to earn ________. Consider another investor who holds a riskless portfolio such as Treasury bills. If the beta is zero then the investor should earn ________.

• A) the riskless rate of return; the market portfolio rate of return.
• B) the risky return; the riskless rate of return.
• C) the market portfolio rate of return; the riskless rate of return.
• D) the market portfolio rate of return; the corporate bond rate of return.

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Definitions:

Purchase Funds

Money allocated or spent for acquiring goods, services, or assets.

Compounded Quarterly

Refers to the process of applying interest to an initial amount and any accumulated interest every three months.

Retirement Income

The total amount of money received from various sources during retirement, including pensions, savings, investments, and social security benefits.

Retirement Funds

Financial assets set aside to support individuals financially when they cease working, typically in the form of pensions or savings plans.