Question

What must be the beta of a portfolio with E(rᵖ) = 14.5% if rf = 4% and E(rᴹ) = 10% ?

Answer 1

To find the beta of a portfolio with given expected returns and risk-free rate, you can use the formula: Beta (β) = (E(rᵖ) - rf) / (E(rᴹ) - rf).

Step-by-step explanation:

To find the beta of a portfolio, we can use the following formula:

Beta (β) = (E(rᵖ) - rf) / (E(rᴹ) - rf)

Given that E(rᵖ) = 14.5%, rf = 4%, and E(rᴹ) = 10%, we can substitute these values into the formula:

Beta (β) = (14.5% - 4%) / (10% - 4%) = 10.5% / 6% = 1.75

Therefore, the beta of the portfolio is 1.75.