What can you assume about an investor whose diversified portfolio of stocks yielded 25% when the market portfolio yielded 15%?
A)treasury bills are offering a 10% yield
B)the portfolio Beta is greater than 1.0
C)the portfolio Beta equals 1.67
D)the investor's portfolio contains many defensive stocks

Question

Quizplus · Accepted Answer

The fact that the investor's diversified portfolio yielded 25% when the market portfolio yielded 15% indicates that the portfolio has a higher return than the market. This suggests that the portfolio might have a higher risk profile than the market, which can be captured by a higher beta. Therefore, we can assume that the portfolio beta is greater than 1.0.

What Can You Assume About an Investor Whose Diversified Portfolio