You Own a Portfolio Which Is Invested Equally in Two

question 82

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 .76
• 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:

Nervous Tissue

Tissue that contains nerve cells (neurons), which conduct impulses, and neuroglia, which support, protect, and provide nutrients to neurons.

Stimuli

External or internal changes that affect the responses of living organisms.

Epithelial

Referring to epithelium, a layer of cells covering the body surfaces, cavities, and organs, serving as a barrier and interface with the environment.

Metabolic Wastes

Substances left over from metabolic processes (like urea, carbon dioxide) that need to be excreted from the body.