The Beta of an Efficient Portfolio

question 36

Multiple Choice

The beta of an efficient portfolio:

• A) must be 1 since an efficient portfolio is perfectly positively correlated with the market portfolio.
• B) is proportional to 1, depending on the proportion invested in the market portfolio.
• C) is equivalent to the portfolio's standard deviation, since standard deviation is the measure of risk for an efficient portfolio.
• D) is always less than 1.

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Definitions:

Customer Margin

The profit generated from a particular customer, calculated by subtracting the costs associated with serving that customer from the revenue they generate.

Serving Customers

The activities involved in providing products or services to customers effectively.

Activity Cost Pools

Accumulations of costs grouped by similar or related activities, used in activity-based costing to allocate costs more accurately.

Supervisory Wages

The compensation paid to individuals who oversee the work of others, managing staff, and ensuring tasks are completed efficiently.