A Stock Has a Beta of 1

question 23

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 a beta of 1.50, what is the weight of the stock in the portfolio?

• A) 105%
• B) 111%
• C) 126%
• D) 119%
• E) 115%

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Definitions:

Obsidian/Glass

A natural volcanic glass formed from the rapid cooling of acidic lava, known for its conchoidal fracture and sharp edges.

Ash

Fine particles of volcanic rock and glass created during volcanic explosions, which can be carried long distances by the wind.

Explosive Eruptions

Volcanic eruptions characterized by the violent expulsion of gases, lava, and rock fragments from a volcano.

Nonexplosive Eruptions

Volcanic eruptions characterized by the effusive emission of lava flows with minimal airborne ash and fragmental material.