You form a portfolio by investing equally in A beta0.8 B beta1.2 the risk-free asset and the market portfolio What is your portfolio beta?
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Answer:
since you invest equally, stock A weight is 50%, and stock weight is 50%. Stock..........Weight......... Beta Stock A.......... 0.5........... 0.8 Stock B.......... 0.5........... 1.2 The portfolio beta = (0.5 x 0.8) + (0.5 x 1.2) = 0.4 + 0.6 = 1.0 Younes Aitouazdi
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