If you hold a portfolio made up of the following stocks:
Investment Value Beta
Stock A $2,000 1.5
Stock B $5,000 1.2
Stock C $3,000 .8
What is the beta of the portfolio?
A) 1.17
B) 1.14
C) 1.32
D) Can't be determined from information given
Changes in the general economy, such as changes in interest rates or tax laws, represent what type of risk?
A) Firm-specific risk
B) Market risk
C) Unsystematic risk
D) Diversifiable risk
A stock with a beta greater than 1.0 has returns that are ________ volatile than the market, and a stock with a beta of less than 1.0 exhibits returns which are ________ volatile than those of the market portfolio.
A) more, more
B) more, less
C) less, more
D) less, less
You hold a portfolio with the following securities:
Percent
Security of Portfolio Beta Return
X Corporation 20% 1.35 14%
Y Corporation 35% .95 10%
Z Corporation 45% .75 8%
Compute the expected return and beta for the portfolio.
A) 10.67%, 1.02
B) 9.9%, 1.02
C) 34.4%, .94
D) 9.9%, .94
The beta of ABC Co. stock is the slope of
A) the security market line.
B) the characteristic line for a plot of returns on the S&P 500 versus returns on short-term Treasury bills.
C) the arbitrage pricing line.
D) the line of best fit for a plot of ABC Co. returns against the returns of the market portfolio for the same period.
