What Is the Beta of a Portfolio If 40 Percent

question 107

Multiple Choice

What is the beta of a portfolio if 40 percent of the funds are invested in a risk-free asset and the balance of the funds is invested in the market portfolio?

• A) 0.4
• B) 0.6
• C) 0.8
• D) 1.0

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Definitions:

Preference Shares

A type of share that typically grants its holders priority over ordinary shareholders in receiving dividends and upon liquidation of the company's assets.

Financial Liability

Obligations a company owes to another entity, which could be in the form of loans, bonds payable, or other types of debt.

Compound Financial Instrument

A financial instrument that has both a debt and equity component and may be convertible into shares of the issuing company.