You own a portfolio equally invested in a risk-free asset and two stocks. One of the...

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You own a portfolio equally invested in a risk-free asset and two stocks. One of the stocks has a beta of 129 and the total p

business accounting

Answer 1

Answer #1

Beta of the market = 1

Beta of the Risk-Free Asset = 0

Portfolio is Totally as risky as Market

Let 2 stocks are Stock A and Stock B

(0.333 * 1.29) + (0.333 * Beta B) + (0.333 * 0) = 1

0.42957 + (0.333 * Beta B) + 0 = 1

Beta of B = 1.71

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Answer 2

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