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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