What Is the Beta of a Portfolio with an Expected

question 122

Multiple Choice

What is the beta of a portfolio with an expected return of 12% if Treasury bills yield 6% and the market risk premium is 8%?

• A) 0.50
• B) 0.75
• C) 0.90
• D) 1.50

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Definitions:

Bond Premium

The amount by which the market price of a bond exceeds its face value, typically occurring when the bond's interest rate is higher than the market rate.

Straight-Line Amortization

A method of systematically reducing a loan or the cost of an intangible asset over a fixed period, where equal amounts are expensed in each period.

Semiannual

Occurring twice a year; a term often used in finance to describe payments, interest accruals, or other events that happen every six months.

Unamortized Discount

The portion of a bond discount that has yet to be expensed in the income statement over the bond's life.