You invest $2000 in stock A and $2000 in stock B. The two stocks have betas...

You invest $2000 in stock A and $2000 in stock B. The two stocks have betas of 1.2 and 1.4. What is the beta of the portfolio?

A. .95
B. 1.01
C. 1.20
D. 1.30
E. 1.40

Solutions

Expert Solution

beta of the portfolio is weighted average beta of individual stock

here weight of each stock is 50% (as inveted same amount)

so beta of the portfolio is

= 1.2*50% + 1.4*50% = 1.3

option D is correct

jeff jeffy answered 2 years ago

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