Question

you have a portfolio with a beta of 1.55. 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 0.84? (do not round intermediate calculation and round your answer to 2 decimal places.)

Answer 1

To find the new portfolio beta, you need to calculate the weighted average of the betas of the old portfolio and the new stock.

Step-by-step explanation:

To find the new portfolio beta, we need to calculate the weighted average of the betas of the old portfolio and the new stock.

First, we calculate the weighted beta of the old portfolio:

Weighted Beta = (Weight of Old Portfolio * Beta of Old Portfolio) = (0.91 * 1.55) = 1.4105

Next, we calculate the weighted beta of the new stock:

Weighted Beta = (Weight of New Stock * Beta of New Stock) = (0.09 * 0.84) = 0.0756

Finally, we calculate the new portfolio beta:

New Portfolio Beta = Weighted Beta of Old Portfolio + Weighted Beta of New Stock = 1.4105 + 0.0756 = 1.4861