You Would Like to Combine a Risky Stock with a Beta

question 50

Multiple Choice

You would like to combine a risky stock with a beta of 1.87 with U.S.Treasury bills in such a way that the risk level of the portfolio is equivalent to the risk level of the overall market.What percentage of the portfolio should be invested in the risky stock?

• A)54.15 percent
• B)53.48 percent
• C)55.09 percent
• D)52.91 percent
• E)54.67 percent

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Definitions:

Ordinal Data

Data that can be categorized or ranked in order but does not quantitatively measure differences between categories.

Normally Distributed Populations

Populations that follow a normal distribution, characterized by a bell-shaped curve.

Z-Test Approximation

A statistical test used to determine if there are significant differences between means with known variance and a large sample size.

Two Independent Samples

A statistical method involving the comparison of two groups of data where the samples are collected independently of one another.