Question
Your father just learned from his financial advisor that his retirement portfolio has a beta of 1.86. He has turned to you to explain to
Your father just learned from his financial advisor that his retirement portfolio has a beta of
1.86.
He has turned to you to explain to him what this means. Specifically, describe what you would expect to happen to the value of his retirement fund if the following were to occur:
a.The value of the market portfolio rises by
10
percent.
b.The value of the market portfolio drops by
10
percent.
c.Is your father's retirement portfolio more or less risky than the market portfolio? Explain.
a.If the value of the market portfolio rises by
10%,
then the value of your father's retirement fund should
increase
decrease
by
%.
(Select from the drop-down menu and round the answer to two decimal places.)
b.If the value of the market portfolio drops by
10%,
then the value of your father's retirement fund should
increase
decrease
by
%.
(Select from the drop-down menu and round the answer to two decimal places.)
c. Your father's retirement portfolio is
less
more
risky than the market portfolio because your father's retirement portfolio beta, it's systematic risk, is
less
greater
than the market's portfolio beta.(Select from the drop-down menus.)
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