Your portfolio has a beta of 1.23. The portfolio consists of 15 percent U.S. Treasury bills,...
Your portfolio has a beta of 1.23. The portfolio consists of 15 percent U.S. Treasury bills, 30 percent in stock A, and 55 percent in stock B. Stock A has a risk-level equivalent to that of the overall market. What is the beta of stock B?
1.69
1.10
1.40
1.29
0.55
Homework Answers
Portfolio beta=Respective beta*Respective weight
1.23=(0.15*0)+(0.3*1)+(0.55*Beta of stock B)[Beta of market=1;Beta of risk-free assets=0]
1.23=0.3+(0.55*Beta of stock B)
Beta of stock B=(1.23-0.3)/0.55
=1.69(Approx).
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