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You own a portfolio equally invested in a risk-free asset and two stocks. if one of the stocks has a beta of 1.86 and the total portfolio is equally as risky as the market, what must the beta be for the other stock in your portfolio? 1.07 .14 1.14 .54 .97

Respuesta :

W0lf93
So if the portfolio is equally invested in all three (one asset and two stocks) so share of each would be 1/3. And to make it equal to the market the product of share and their beta adding all of them should be equal to 1. so equation would be 1/3(0)+1/3(1.86)+1/3(x)=1 which gives x=1.14 so the beta of second stock should be 1.14

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