A Portfolio Is Made Up of Stocks A, B, C

question 4

Multiple Choice

A portfolio is made up of Stocks A, B, C, and D in the proportion of 20%, 30%, 25%, and 25% respectively. The nondiversifiable risks of the stocks as measured by their betas are 0.4, 1.2, 2.5, and 1.75 for Stock A, B, C, and D respectively. The expected returns of the stocks are 12%, 24%, 30%, and 28% respectively. Measure the beta of the portfolio.

• A) 1.8
• B) 1.9
• C) 1.5
• D) 1.4
• E) 1.3

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Definitions:

Equity

The value of an owner's interest in a property or business, after all debts and other liabilities have been deducted.

Inventory Turnover Ratio

A financial metric indicating how many times a company’s inventory is sold and replaced over a particular period, revealing efficiency in inventory management.

Average Merchandise Inventory

The average value of a company’s inventory over a certain period, calculated to evaluate inventory levels and turnover.

Cost of Goods Sold

Costs directly incurred from producing goods a company sells, involving the expenses for materials and labor.