An investor has $10,000 invested in Treasury securities (i

Finance Dec 26, 2020

An investor has $10,000 invested in Treasury securities (i.e., a risk-free asset) and $15,000 invested in stock UV. UV has a beta of 1.2. What is the beta of the portfolio?

Expert Solution

Total value = 10,000 + 15,000 = 25,000

The beta of a risk free asset will always be 0.

Beta of portfolio = Weighted average beta

Beta of portfolio = (15,000 / 25,000)*1.2 + (10,000 / 25,000) * 0

Beta of portfolio = 0.72 + 0

Beta of portfolio = 0.72

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