Portfolio beta is used to measure the portfolio’s overall systematic risk of an investment which equals the weighted average of all individual stock’s beta coefficient in a portfolio. The investment in stock S is 40% and in stock X is 60%. The stock S’s beta coefficient is 1.5 and the portfolio beta coefficient is 2.1.

Question

A real estate broker insures an office building for $500,000 under a Building and Personal Property Coverage Form with a Causes of Loss-Broad Form attached. If smoke from a nearby industrial factory enters the office building and causes $10,000 in damage to the interior, the policy will pay a MAXIMUM of which of the following amounts? a. $0 b. $1,000 c. $5,000 d. $10,000

Answer 1

Question

Chapter 8, Problem 10PROB

Summary Introduction

Portfolio beta is used to measure the portfolio’s overall systematic risk of an investment which equals the weighted average of all individual stock’s beta coefficient in a portfolio.

The investment in stock S is 40% and in stock X is 60%. The stock S’s beta coefficient is 1.5 and the portfolio beta coefficient is 2.1.

Expert Solution & Answer

Trending nowThis is a popular solution!

See solution

Check out sample textbook solution

Students have asked these similar questions

A real estate broker insures an office building for $500,000 under a Building and Personal Property Coverage Form with a Causes of Loss-Broad Form attached. If smoke from a nearby industrial factory enters the office building and causes $10,000 in damage to the interior, the policy will pay a MAXIMUM of which of the following amounts? a. $0 b. $1,000 c. $5,000 d. $10,000

National Bank currently has $500 million in transaction deposits on its balance sheet. The current reserve requirement is 10 percent, but the Federal Reserve is decreasing this requirement to 8 percent. Show the balance sheet of the Federal Reserve and National Bank if National Bank converts all excess reserves to loans, but borrowers return only 50 percent of these funds to National Bank as transaction deposits. Show the balance sheet of the Federal Reserve and National Bank if National Bank converts 75 percent of its excess reserves to loans and borrowers return 60 percent of these funds to National Bank as transaction deposits.

The FOMC has instructed the FRBNY Trading Desk to purchase $500 million in U.S. Treasury securities. The Federal Reserve has currently set the reserve requirement at 5 percent of transaction deposits. Assume U.S. banks withdraw all excess reserves and give out loans. What is the full effect of this purchase on bank deposits and the money supply if borrowers return only 95 percent of these funds to their banks in the form of transaction deposits?