Why Choose Us?
0% AI Guarantee
Human-written only.
24/7 Support
Anytime, anywhere.
Plagiarism Free
100% Original.
Expert Tutors
Masters & PhDs.
100% Confidential
Your privacy matters.
On-Time Delivery
Never miss a deadline.
You own a portfolio which is 30 percent invested in U
You own a portfolio which is 30 percent invested in U.S. Treasury bills, 20 percent invested in Stock A with a beta of 1.20. 10 percent invested in stock B with a beta of.90, and the remainder is invested in stock C. Stock C is as equally risky as the market. The risk-free rate of return is 4 percent and the expected return on the market is 10 percent. What is the portfolio beta? 0.60 0.80 0.73 1.10 2.20
Expert Solution
Portfolio beta is the weighted average of beta of individual stocks. Beta of risk free security is zero and Beta of Market is 1.
Since Stock C is as risky as market thus the Beta of Stock C is 1.
| Stock | Beta | Weights | Weighted Average beta = (Beta * Weights) |
| Treasury Bill | 0 | 0.30 | 0 (0 * 0.3) |
| Stock A | 1.20 | 0.20 | 0.24 (1.2 * 0.2) |
| Stock B | 0.90 | 0.10 | 0.09 (0.9 * 0.10) |
| Stock C | 1 | 0.40 | 0.40 (1 * 0.4) |
| Total | 0.73 |
Ans : Portfolio beta is 0.73.
Archived Solution
You have full access to this solution. To save a copy with all formatting and attachments, use the button below.
For ready-to-submit work, please order a fresh solution below.
