You Would Like to Combine a Risky Stock with a Beta

question 12

Multiple Choice

You would like to combine a risky stock with a beta of 1.6 with U.S.Treasury bills in such a way that the risk level of the portfolio is equivalent to the risk level of the overall market.What percentage of the portfolio should be invested in the risky asset?

• A)16.00%
• B)62.50%
• C)52.55%
• D)47.45%
• E)37.5%

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Definitions:

Higher Salary

An increased amount of money earned by an employee for their work, often due to promotions, skill upgrades, or market demand for their role.

Identical Characteristics

A term describing goods, services, or entities that have the same attributes and qualities, making them indistinguishable in certain respects.

Wage Differentials

The variations in wage rates due to differences in occupation, sector, qualifications, and experience among workers.

Labor Market

A marketplace where employers find workers and workers find jobs, governed by supply and demand for labor.