You Would Like to Combine a Risky Stock with a Beta

question 105

Multiple Choice

You would like to combine a risky stock with a beta of 1.68 with U.S.Treasury bills in such a way that the risk level of the portfolio is equivalent to the risk level of the overall market.What percentage of the portfolio should be invested in the risky stock?

• A)32 percent
• B)40 percent
• C)54 percent
• D)60 percent
• E)68 percent

---

Definitions:

Net Working Capital

The difference between a firm's current assets and its current liabilities, indicating the short-term financial health and working capital efficiency of the business.

Total Assets Ratio

A financial metric that compares the value of a company's total assets to another relevant value, often used in financial analysis to gauge company size or efficiency.

Financial Position

A snapshot of a company's assets, liabilities, and equity at a specific point in time, indicating its financial health.

Cash Coverage Ratio

A financial metric that measures a company's ability to cover its interest obligations with its operating cash flow.