You Want Your Portfolio Beta to Be 1

question 10

Multiple Choice

You want your portfolio beta to be 1.20. Currently, your portfolio consists of $100 invested in stock A with a beta of 1.4 and $300 in stock B with a beta of.6. You have another $400 to invest and want to divide it between an asset with a beta of 1.6 and a risk-free asset. How much should you invest in the risk-free asset?

• A) $0
• B) $140
• C) $200
• D) $320

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Definitions:

Credibility

The quality of being trustworthy or believable, often based on a reputation for reliability and integrity.

Equitably

In a fair and impartial manner, ensuring equal treatment and justice for all involved parties.

Reasoning

The process of forming conclusions, judgments, or inferences from facts or premises.

Achievable Solutions

Achievable solutions refer to resolutions or strategies that can realistically be implemented to address a problem or challenge, considering existing constraints.