A Stock Has a Beta of 1

question 103

Multiple Choice

A stock has a beta of 1.30 and an expected return of 16 percent. The risk-free rate is 5 percent. What is the expected return on a portfolio that is equally-weighted in the two assets?

• A) 10.50%
• B) 9.75%
• C) 11.25%
• D) 11.00%
• E) 10.00%

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Definitions:

Z

'Z' often represents the Z-score in statistics, which is the number of standard deviations a data point is from the mean of the data set.

Square

A polygon with four equal sides and four right angles.

Relationship

How two or more notions, entities, or persons are associated, or the status of association.

Populations

The whole set of individuals or objects of interest in a particular study or statistical analysis.