A Portfolio Contains Two Assets

question 63

Multiple Choice

A portfolio contains two assets.The first asset represents 25 percent of the portfolio and has a beta of 1.4.If the portfolio beta is 1.25,what is the beta of the second asset?

• A)1.10
• B)1.36
• C)1.20
• D)1.40
• E)1.27

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Definitions:

Fair-Value Method

An accounting approach where assets and liabilities are recorded at their current market values rather than their original cost.

Goodwill

An intangible asset arising when a company acquires another for a price higher than the fair market value of its net assets.

Other Comprehensive Income

Income that includes all changes in equity during a period except those resulting from investments by owners and distributions to owners.

Equity Method

A financial recording method where investments are logged if the investor has a considerable impact on the investee, though not complete control.