A Stock Has a Beta of 1

question 41

Multiple Choice

A stock has a beta of 1.30 and an expected return of 16 percent. The risk-free rate is 5 percent. If a portfolio of the two assets has an expected return of 13 percent, what is the beta of the portfolio?

• A) 1.06
• B) 0.87
• C) 1.02
• D) 0.95
• E) 0.91

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Definitions:

Tumor

Tissue that becomes an abnormal lump due to cells dividing more than necessary or not dying as they should.

Myositis

Inflammation of the muscles that can cause weakness and swelling.

Muscle Tissue

A tissue composed of cells or fibers, the function of which is to produce force and cause motion, either locomotion or movement within internal organs.

Inflammation

A biological response to harmful stimuli, characterized by redness, swelling, heat, and pain.