Explain How the Beta of a Portfolio Can Equal the Market

question 71

Essay

Explain how the beta of a portfolio can equal the market beta if 50 percent of the portfolio is invested in a security that has twice the amount of systematic risk as an average risky security.

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Definitions:

Final-Offer Arbitration

A dispute resolution process where each party presents their best offer, and an arbitrator chooses one of the offers with no alterations as the resolution.

Cooling-Off Effect

A period designed to allow parties in a dispute to calm emotions and reconsider their positions.

Arbitration

A method of dispute resolution involving a neutral third party who makes a binding decision.

Advisable

Worthy of being recommended or suggested as a prudent or wise course of action.