A Portfolio Consists of One Risky Asset and One Risk-Free

question 60

Multiple Choice

A portfolio consists of one risky asset and one risk-free asset.The risky asset has an expected return of 11.2 percent and a beta of 1.39.The risk-free asset has an expected return of 3.4 percent.How much of the portfolio is invested in the risk-free asset if the portfolio beta is 1.07?

• A) 16 percent
• B) 23 percent
• C) 32 percent
• D) 45 percent
• E) 54 percent

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Definitions:

Separation Of Duties

An internal control measure that prevents fraud and errors by dividing responsibilities among different employees.

Unpaid Voucher File

A file that keeps track of vouchers which have been issued but not yet paid.

Cash Discounts

A reduction in the invoice amount by a seller, offered to the buyer in return for early payment of their bill.

Stock Dividends

A form of dividend payment made in the form of additional shares rather than cash, increasing the number of outstanding shares.