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:

Barriers To Entry

Obstacles that make it difficult for new firms to enter a market, such as high initial investment, licensing requirements, and access to technology.

Patents

Legal documents granting an inventor exclusive rights to their invention, preventing others from making, using, or selling the invention for a certain period of time.

Pharmaceutical Companies

Organizations dedicated to developing, producing, and marketing drugs or pharmaceuticals licensed for use as medications.

Monopoly Position

A situation in which a single company or entity has exclusive control over a particular market or industry, eliminating competition.