You Want to Buy $20,000 Worth of Shares in Tootsie

question 16

Multiple Choice

You want to buy $20,000 worth of shares in Tootsie Roll Industries Inc.on margin,but you only have $10,000 of your own money to invest.The remaining $10,000 is borrowed by issuing T-Bills; assume the cost of borrowing is the risk-free rate.The weight of Tootsie Roll Industries in your portfolio is 2.0.The weight of T-Bills in your portfolio is -1.0.Assume that Tootsie Roll has a beta of 0.75.What is the beta of the portfolio?

• A) 0.75
• B) 1.25
• C) 1.50
• D) 1.75
• E) 2.00

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