Suppose You Held a Well-Diversified Portfolio with a Very Large

question 8

Multiple Choice

Suppose you held a well-diversified portfolio with a very large number of securities, and that the single index model holds. If the σ of your portfolio was 0.20 and σ_M was 0.16, the β of the portfolio would be approximately

• A) 0.64.
• B) 0.80.
• C) 1.25.
• D) 1.56.

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Definitions:

Capital Investment

Funds invested in a business or project for the purpose of furthering its objectives, often involving the purchase of long-term assets.

Environmental Performance

An evaluation of how well an organization adheres to environmentally sustainable practices and minimizes its ecological footprint.

Balanced Scorecard

A strategic planning and management system used to align business activities to the vision and strategy of the organization.

Life Cycle Assessment

A method used to evaluate the environmental impacts of a product, process, or service, from raw material extraction through materials processing, manufacture, distribution, use, repair and maintenance, and disposal or recycling.