Final answer:
The beta of a portfolio with 60% in an index fund and 40% in Treasury securities is calculated as a weighted average. Considering the index fund's beta is 1 and the Treasury's beta is 0, the portfolio's beta rounds to 0.6. This represents lower volatility and risk than the market.
Step-by-step explanation:
The beta of a portfolio indicates its relative volatility in comparison to the market as a whole, with the market having a beta of 1. Since Treasury securities are considered to have no risk, they also have a beta of 0. If a portfolio comprises 60% of a stock index fund with a beta of 1 (since it tracks the stock market), and 40% is invested in Treasury securities with a beta of 0, we can calculate the overall portfolio beta using the weighted average formula:
Beta of the portfolio = (Weight of index fund × Beta of index fund) + (Weight of Treasury securities × Beta of Treasury securities)
Beta of the portfolio = (0.6 × 1) + (0.4 × 0)
Beta of the portfolio = 0.6 + 0
Beta of the portfolio = 0.6
The rounded beta to one decimal place is 0.6, so the risk profile of the portfolio would be less volatile than the market as a whole, which suits investors looking for a lower-risk investment option while still participating in the equity market.