Rf=2%, Rm= 10% An equal weighted portfolio of stock X and Rf yields a return of...

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Rf=2%, Rm= 10% An equal weighted portfolio of stock X and Rf yields a return of...

Rf=2%, Rm= 10%

An equal weighted portfolio of stock X and Rf yields a return of 10%

A portfolio of stock Y and Rf with a 75% investment in stock Y yields a return of 6.5%

What is the market beta of a portfolio if we invest 40%in X, 20% in Y, 20% in Rf and 20% in the market?

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Answer 1

Answer #1

0.5*Rx+0.5*2%=10% =>Rx=18%
0.75*Ry+0.25*2%=6.5% =>Ry=8%

Beta=40%*(18%-2%)/(10%-2%)+20%*(8%-2%)/(10%-2%)+20%*0+20%*1=1.15

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Answer 2

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