CFP® Practice Question: Which Portfolio Would You Choose?
Portfolio X has a weighted beta coefficient of 1.5, and Portfolio Y has a weighted beta coefficient of .8. Both portfolios are expected to earn the same weighted-average expected return. With these assumptions, which of the following statements is correct?
- An investor should choose Portfolio X because of its higher beta.
- An investor should choose Portfolio Y because it carries less risk for the given expected return.
- An investor may be indifferent between the two since the expected return is the same.
- The information given is not helpful in making a choice.