A Portfolio Consists of Two Stocks and Has a Beta

question 58

Multiple Choice

A portfolio consists of two stocks and has a beta of 1.20.The first stock has a beta of 1.02 and comprises 30 percent of the portfolio.What is the beta of the second stock?

• A) 0.41
• B) 0.66
• C) 0.82
• D) 1.28
• E) 1.35

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Definitions:

Paid-in Capital

Funds raised by a company through the sale of common or preferred stock.

Preferred Stock

A type of stock that provides a fixed dividend before any dividends are paid to common stockholders and typically has no voting rights.

Common Stock

Represents ownership shares in a corporation, giving holders voting rights and a share in the company's profits through dividends.

Stockholders' Equity

The residual interest in the assets of a corporation after deducting its liabilities; represents the ownership interest of the shareholders.