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Your portfolio has a beta of 1.28. The portfolio consists of 25 percent U.S. Treasury bills, 31 percent Stock A, and 44 percent Stock B. Stock A has a risk-level equivalent to that of the overall market.
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Your portfolio has a beta of 1.28. The portfolio consists of 25 percent U.S. Treasury bills, 31 percent Stock A, and 44 percent Stock B. Stock A has a risk-level equivalent to that of the overall market. What is the beta of Stock B

User Shadi Shaaban
by
3.7k points

1 Answer

3 votes

Answer:

2.21

Step-by-step explanation:

Portfolio beta = Respective beta*Respective weight

Beta of market=1;Beta of risk-free assets=0

1.28 = (0.25*0) + (0.31*1) + (0.44*Beta of Stock B)

1.28 = 0 + 0.31 + 0.44*Beta of Stock B

1.28 - 0.31 = 0.44*Beta of Stock B

Beta of Stock B = 0.97/0.44

Beta of Stock B = 2.204545454545455

Beta of Stock B = 2.21

User Oleh Kudinov
by
3.5k points
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