You Are Considering a Portfolio of Three Shares with 30

question 23

Multiple Choice

You are considering a portfolio of three shares with 30% of your money invested in company X, 45% of your money invested in company Y and 25% of your money invested in company Z.If the betas for each shares are 1.22 for company X, 1.46 for company Y and 1.03 for company Z, what is the portfolio beta?

• A)1.24
• B)1.00
• C)1.28
• D)1.33

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Definitions:

Potential Level

The potential level of output, or potential GDP, is the maximum amount of goods and services an economy can produce when it is fully utilizing its resources, without causing inflation to rise.

Fixed-growth-rate Monetary Policy

A monetary policy framework aiming to maintain a predetermined rate of growth in the money supply.

Active Fiscal Policy

Government policy that involves altering government spending and taxation to influence the economy.

Short-run Phillips Curve

An economic model depicting an inverse relationship between the rate of unemployment and the rate of inflation in the short-term.