37. Given the following information, what is the beta of the portfolio?
Stock Amount Invested Expected Return Beta
X \$25,000 16% 1.35
Y \$40,000 13% 1.10
Z \$35,000 10% 0.85
a. 0.98
b. 1.08
c. 1.11
d. 1.27
38. Suppose that you are forming a portfolio of common stocks by randomly selecting stocks
that are trading on the New York Stock Exchange. You observe that when you increase
the portfolio size from 2 to 3 stocks, the portfolio standard deviation drops by 4.2 percent.
If you continue adding stocks, you would expect the reduction in portfolio standard
deviation when you add the fifth stock to be:
a. exactly 4.2 percent.
b. greater than 4.2 percent.
c. less than 4.2 percent.
d. exactly zero.