Question

You invest $650 in security A with a beta of 1.2 and $450 in security B with a beta of 0.7. The beta of this portfolio is _________.

Answer 1

Beta of this portfolio = 0.9953

Step-by-step explanation:

Given:

Investment in security A = $650 beta 1.2

Investment in security B = $450 beta 0.7

Find:

Beta of this portfolio

Computation:

Beta of this portfolio = [650 / (650+450)]1.2 + [450 / (650+450)]0.7

Beta of this portfolio = [650 / (1,100)]1.2 + [450 / (1,100)]0.7

Beta of this portfolio = 0.7090 + 0.2863

Beta of this portfolio = 0.9953