Suppose the Beta of a Four-Asset Portfolio Is 1

question 44

Multiple Choice

Suppose the beta of a four-asset portfolio is 1.8.The portfolio is composed of $1,500 invested in Stock W,$2,000 in Stock X,$2,500 in Stock Y,and $3,000 in Stock Z.What is the beta of Stock Z if the betas of Stock W,X,and Y are 0.7,1.3,and 2.5,respectively?

• A) 0.7
• B) 1.1
• C) 1.6
• D) 2.1

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Definitions:

Before Maturity

Refers to the period or action taken before a financial instrument, such as a bond or fixed-income security, reaches its maturity date or the due date for principal repayment.

Bond Premium

The amount by which the market price of a bond exceeds its face value, typically occurring when the bond's interest rate is higher than the market rate.

Straight-Line Amortization

A method of systematically reducing a loan or the cost of an intangible asset over a fixed period, where equal amounts are expensed in each period.

Semiannual

Occurring twice a year; a term often used in finance to describe payments, interest accruals, or other events that happen every six months.