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professor190 [17]
3 years ago
14

Your portfolio has a beta of 1.28. The portfolio consists of 25 percent U.S. Treasury bills, 31 percent Stock A, and 44 percent

Stock B. Stock A has a risk-level equivalent to that of the overall market. What is the beta of Stock B
Business
1 answer:
Ivanshal [37]3 years ago
7 0

Answer:

2.21

Explanation:

Portfolio beta = Respective beta*Respective weight

<em>Beta of market=1;Beta of risk-free assets=0</em>

1.28 = (0.25*0) + (0.31*1) + (0.44*Beta of Stock B)

1.28 = 0 + 0.31 + 0.44*Beta of Stock B

1.28 - 0.31 = 0.44*Beta of Stock B

Beta of Stock B = 0.97/0.44

Beta of Stock B = 2.204545454545455

Beta of Stock B = 2.21

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