Question

You have a portfolio with a beta of 1.63. What will be the new portfolio beta if you keep 91 percent of your money in the old portfolio and 9 percent in a stock with a beta of 0.60

Answer 1

To calculate the new portfolio beta, multiply the beta of each component by the proportion of the portfolio value it represents.

Step-by-step explanation:

To calculate the new portfolio beta, we need to multiply the beta of each component in the portfolio by the proportion of the portfolio value it represents. Given that 91% of the money is in the old portfolio with a beta of 1.63, and 9% is in a stock with a beta of 0.60, we can calculate the new portfolio beta as follows:

New Portfolio Beta = (91% x 1.63) + (9% x 0.60) = 1.482 + 0.054 = 1.536.

Therefore, the new portfolio beta is 1.536.