You Own a Portfolio Which Is Invested Equally in Two

question 50

Multiple Choice

You own a portfolio which is invested equally in two stocks and a risk-free security.The stock betas are .89 for Stock A and 1.26 for Stock B.Which one of the following will increase the portfolio beta,all else constant?

• A) increasing the amount invested in the risk-free security
• B) decreasing the weight of Stock B and increasing the weight of Stock A
• C) replacing Stock A with a security that has a beta of .77
• D) increasing the weight of Stock A and decreasing the weight of the risk-free security
• E) replacing Stock B with Stock C,which has a beta equal to that of the market

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Definitions:

Randomized Block Design

A statistical experiment design that aims to reduce the effects of confounding variables by dividing subjects into blocks before randomly assigning treatments.

Soil Type

A classification of soil based on its physical and chemical properties, such as texture, structure, and nutrient content.

Wheat Varieties

Varieties of wheat distinct by their genetic makeup, growth habits, and physical characteristics, used for various wheat products.

Randomized Block Design

An experimental design that divides subjects into blocks before randomly assigning treatments to reduce variation caused by confounding variables.