Question

An investment banker has recommended aâ $100,000 portfolio containing assetsâ B, D, and F.â $20,000 will be invested in assetâ B, with a beta ofâ 1.5; $50,000 will be invested in assetâ D, with a beta ofâ 2.0; andâ $30,000 will be invested in assetâ F, with a beta of 0.5. The beta of the portfolio isâ

Answer 1

β = 1.45

Step-by-step explanation:

The beta of the portfolio is defined as an average of the betas (β) of each asset within the portfolio weighted by their respective invested amounts (A):

`A_(P)* \beta_(P) =A_(B)* \beta_(B) +A_(D)* \beta_(D) +A_(F)* \beta_(F) \\\beta_(P) =(20,000 * 1.5 + 50,000*2.0 +30,000*0.5)/(100,000)\\\beta_(P) = 1.45`

The beta of the portfolio is 1.45