A Stock Has a Beta of 1

question 35

Multiple Choice

A stock has a beta of 1.2 and an expected return of 17 percent.A risk-free asset currently earns 5.1 percent.The beta of a portfolio comprised of these two assets is 0.85.What percentage of the portfolio is invested in the stock?

• A)71 percent
• B)77 percent
• C)84 percent
• D)89 percent
• E)92 percent

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Definitions:

Noncompensatory Decision Rule

A decision-making strategy where an option is rejected if it fails to meet at least one important criterion, regardless of its merits in other areas.

Decision Making

The cognitive process of selecting a course of action from among multiple alternatives to achieve a desired objective.

Extended Problem-Solving

A consumer behavior process involving careful and deliberate effort in researching and comparing different products before making a purchase.

Limited Problem-Solving

A consumer decision-making process used for purchases that require a moderate level of deliberation and effort.