Question

Portfolio Beta (LG10-3) You have a portfolio with a beta of 1.16. What will be the new portfolio beta if you keep 90 percent of your money in the old portfolio and 10 percent in a stock with a beta of 0.69?

Answer 1

the new portfolio beta is 1.11

Step-by-step explanation:

The computation of the new portfolio beta is as follows;

The Beta of the new portfolio is

= (Portfolio beta × given percenatge) + (beta of the stock × given percentage)

= (1.16 × 0.9) + (0.69 × 0.1)

= 1.11

hence, the new portfolio beta is 1.11

We simply applied the above formula so that the correct value could come

And, the same is to be considered