Your portfolio has a beta of 1.17. The portfolio consists of 16 percent U.S. Treasury bills,...
Your portfolio has a beta of 1.17. The portfolio consists of 16 percent U.S. Treasury bills, 31 percent in stock A, and 53 percent in stock B. Stock A has a risk-level equivalent to that of the overall market. What is the beta of stock B?
1.23
1.62
0.53
1.06
1.37
Homework Answers
| Weight of Stock B = 0.53 |
| Weight of Stock A = 0.31 |
| Weight of T bill = 0.16 |
| Beta of Portfolio = Weight of Stock B*Beta of Stock B+Weight of Stock A*Beta of Stock A+Weight of T bill*Beta of T bill |
| 1.17 = Beta of Stock B*0.53+1*0.31+0*0.16 |
| Beta of Stock B = 1.62 |
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