Question

You invest $600 in security A with a beta of 1.5 and $400 in security B with a beta of 0.90. The beta of this portfolio is _________.

Answer 1

Answer:

Beta= 1.26

Explanation:

First, we will calculate the proportion of the portfolio of each security:

Security A= 600/1,000= 0.6

Security B= 400/1,000= 0.4

Now, the beta of the portfolio:

Beta= (proportion of investment A*beta A) + (proportion of investment B*beta B)

Beta= (0.6*1.5) + (0.4*0.9)

Beta= 1.26