Final answer:
The beta of a 50-50 portfolio can be calculated by taking the weighted average of the betas of the individual stocks. In this case, the portfolio beta is 1.25.
Step-by-step explanation:
The beta of a portfolio is determined by taking the weighted average of the betas of the individual stocks in the portfolio. Since the portfolio is 50-50, we can calculate the beta as follows:
Portfolio Beta = (Weight of Stock A x Beta of Stock A) + (Weight of Stock B x Beta of Stock B)
Portfolio Beta = (0.5 x 2) + (0.5 x 0.5) = 1 + 0.25 = 1.25