Question

If a two-stock portfolio is equally invested in stocks with betas of 1.4 and 0.7, then the portfolio beta is:_______.

A. 0.70.
B. 1.05.
C. 1.40.
D. 2.10.

Answer 1

Beta= 1.05

Step-by-step explanation:

Giving the following information:

A two-stock portfolio is equally invested in stocks with betas of 1.4 and 0.7.

To calculate the Beta of the portfolio, we need to use the following formula:

Beta= (proportion of investment A*beta A) + (proportion of investment B*beta B)

Beta= (0.5*1.4) + (0.5*0.7)

Beta= 1.05