A Portfolio Consists of Two Stocks and Has a Beta

question 33

Multiple Choice

A portfolio consists of two stocks and has a beta of 1.25.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:

Predetermined Limits

Constraints or boundaries that are set in advance, defining the permissible scope of actions or the extent of an activity or process.

Unity of Command

A principle in management and organization theory stating that each employee should receive orders from and be accountable to only one supervisor.

Boundary-spanning

Involves activities or roles that connect an organization with its external environment, facilitating information flow and coordination between internal and external stakeholders.

Hierarchical Differentiation

The extent to which an organization or system is divided into levels of authority or ranks, creating a hierarchy.