Stock J Has a Beta of 1

question 29

Multiple Choice

Stock J has a beta of 1.17 and an expected return of 14.4 percent,while Stock K has a beta of 0.68 and an expected return of 7.6 percent.You want a portfolio with the same risk as the market.What is the expected return of your portfolio?

• A)10.67 percent
• B)11.18 percent
• C)11.62 percent
• D)12.04 percent
• E)13.13 percent

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Definitions:

Imaginary Audience

A psychological concept describing a phenomenon where an individual imagines and believes that multitudes of people are eagerly listening to or watching them, a common occurrence during adolescence.

Personal Fable

A cognitive distortion commonly found in adolescence, where an individual believes they are unique and invulnerable to risks.

Self-Reliance

The reliance on one's own powers and resources rather than those of others.

Authoritative Parenting

Style of parenting in which parent combines warmth and affection with firm limits on a child’s behavior.