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26 September, 17:09

You own a portfolio equally invested in a risk-free asset and two stocks. if one of the stocks has a beta of 1.86 and the total portfolio is equally as risky as the market, what must the beta be for the other stock in your portfolio? 1.07.14 1.14.54.97

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  1. 26 September, 19:20
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    So if the portfolio is equally invested in all three (one asset and two stocks) so share of each would be 1/3. And to make it equal to the market the product of share and their beta adding all of them should be equal to 1. so equation would be 1/3 (0) + 1/3 (1.86) + 1/3 (x) = 1 which gives x=1.14 so the beta of second stock should be 1.14
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Home » Business » You own a portfolio equally invested in a risk-free asset and two stocks. if one of the stocks has a beta of 1.86 and the total portfolio is equally as risky as the market, what must the beta be for the other stock in your portfolio? 1.07.14 1.14.54.
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