An Investor Prefers to Invest in Companies That Have High

question 64

Multiple Choice

An investor prefers to invest in companies that have high operating leverage.How can this be accomplished if the investor also requires a portfolio beta of 1.0?

• A) Invest 50% in cyclical stocks and 50% in firms with high operating leverage
• B) Invest 50% in a market index fund and 50% in firms with high operating leverage
• C) Finance part of the portfolio with borrowing
• D) Invest a portion of the portfolio in U.S. Treasury securities

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