A Portfolio Has a Beta of 1

question 28

Multiple Choice

A portfolio has a beta of 1.27.The portfolio consists of 25 percent U.S.Treasury bills,38 percent Stock A,and 37 percent Stock B.Stock A has a risk level equivalent to that of the overall market.What is the beta of Stock B?

• A)1)54
• B)1)49
• C)2)02
• D)1)79
• E)2)41

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Definitions:

Residuals

The differences between observed values and the values predicted by a model, used in regression analysis to assess the fit of the model.

Regression Model

A statistical model used to understand the relationship between one dependent variable and one or more independent variables.

Multiple Linear Regression

A method in statistics that establishes the connection between one dependent variable and multiple independent variables by applying a linear equation to the data collected.

Salary

Salary is the fixed regular payment, typically expressed on an annual basis, made by an employer to an employee, especially a professional or white-collar worker.