Assuming positive returns on Treasury bills, 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 market portfolio yielded 15% and assuming positive returns on Treasury bills, the risk-free rate of return would be less than 15%. Therefore, a portfolio that yielded 25% would have to have a higher level of risk than the market, which would mean that the portfolio beta is greater than 1.0.

Assuming Positive Returns on Treasury Bills, What Can You Assume