You Want Your Portfolio Beta to Be 0

question 72

Multiple Choice

You want your portfolio beta to be 0.95. Currently, your portfolio consists of $4,000 invested in stock A with a beta of 1.47 and $3,000 in stock B with a beta of 0.54. You have another $9,000 to invest and want to divide it between an asset with a beta of 1.74 and a risk-free asset. How much should you invest in the risk-free asset?

• A)$4,316.08
• B)$4,425.29
• C)$4,902.29
• D)$4,574.71
• E)$4,683.92

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Definitions:

Concrete Operational

A stage in Piaget's theory of cognitive development where children gain the ability to think logically about concrete events.

Analogies

Comparisons made between two things that are otherwise unlike, intended to explain or clarify some unfamiliar or difficult idea or object by associating it with something more familiar.

Mathematical Operations

Basic procedures, including addition, subtraction, multiplication, and division, used in mathematics to calculate and solve problems.

Schema

A cognitive framework or concept that helps organize and interpret information in the brain.