Julie wants a $5000 portfolio. She wants to invest as much as possible in a high
ID: 2675744 • Letter: J
Question
Julie wants a $5000 portfolio. She wants to invest as much as possible in a high risk stock, hoping to earn a high rate of return. However, she wants her portfolio to have no more risk than the overall market. Which of the following portfolios is most apt to meet her objectives?a. Invest the entire $5000 in stock with a beta of 1.0
b. Invest $2500 in stock with beta of 1.98 and $2500 in a stock with beta of 1.0
c. Invest $2500 in a risk free asset and $2500 in a stock with beta of 2.0
d. Invest $2500 in a stock with a beta of 1.0; $1250 in risk free asset, and $1250 in stock with beta of 2.0
e. Invest $2000 in a stock with beta of 3.0; $2000 in a risk free asset, and $1000 in a stock with a beta of 1.0
Explanation / Answer
c. Invest $2500 in a risk free asset and $2500 in a stock with beta of 2.0 answer
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