Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Portfolio A is a well-diversified portfolio that is equally-weighted among 7,100 different and diverse stocks. Portfolio A has an average amount of systematic risk, so

Portfolio A is a well-diversified portfolio that is equally-weighted among 7,100 different and diverse stocks. Portfolio A has an average amount of systematic risk, so it has the same amount of systematic risk as the market portfolio. Portfolio B consists of 2 stocks that operate in the athletic apparel industry: 900 shares of XYZ stock, which has a price of $14.00 per share and a beta of 0.73; and 450 shares of X Factor Gear stock, which has a price of $8.00 per share and a beta of 1.86. All stocks have some unsystematic risk and all stocks have the same level of unsystematic risk. Which one of the following assertions is most likely to be true?

a.

Portfolio A either has the same amount of systematic risk as portfolio B or portfolio A has the same amount of unsystematic risk as portfolio B, or portfolio A has the same amount of systematic risk and unsystematic risk as portfolio B

b.

Portfolio B has more systematic risk than portfolio A, and portfolio A has more unsystematic risk than portfolio B

c.

Portfolio B has more systematic risk than portfolio A, and portfolio B has more unsystematic risk than portfolio A

d.

Portfolio A has more systematic risk than portfolio B, and portfolio A has more unsystematic risk than portfolio B

e.

Portfolio A has more systematic risk than portfolio B, and portfolio B has more unsystematic risk than portfolio A

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Financial Management For Public Health And Not-for-Profit Organizations

Authors: Steven A. Finkler, Daniel L. Smith, Thad D. Calabrese, Robert M. Purtell

7th Edition

1071835335, 978-1071835333

More Books

Students also viewed these Finance questions