Your Desired Portfolio Beta Is 1

question 71

Multiple Choice

Your desired portfolio beta is 1.2.Currently,your portfolio consists of $2,300 invested in Stock A with a beta of 1.43 and $3,800 in Stock B with a beta of 0.79.You have an additional $1,500 to invest and want to divide it between Stock C with a beta of 1.59 and a risk-free asset.How much should you invest in the risk-free asset?

• A)−$279.25
• B)$50.25
• C)−$200.15
• D)$182.35
• E)$246.08

---

Definitions:

Representational Faithfulness

The extent to which financial statements accurately reflect the economic phenomena they purport to represent.

Verifiability

A concept in accounting referring to the ability to ensure that different knowledgeable and independent observers can agree that a particular representation of financial information is faithfully depicted.

Reliable Information

Information that is accurately and precisely presented, free from significant error or bias, making it dependable for making financial decisions.

Diversified Group

A group of companies or entities operating across different sectors or industries, reducing risk through diversification.