You own a portfolio equally invested in a risk-free asset and two stocks. If one of...

You own a portfolio equally invested in a risk-free asset and two stocks. If one of the stocks has a beta of 1.20 and the beta of the portfolio is 1.80, what is the beta of the other ? (2 points) one ot the

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Bet of the Portfolio = Weight of Stock 1 X Beta of Stock 1+ Weight of stock 2 X Beta of Stock 2
1.80 = 0.50 X 1.20 + 0.50 X Beta of Stock 2
1.80 = .60 + 0.50 X Beta of Stock 2
0.5 Beta of Stock 2 = 1.80 - 0.60
0.5 Beta of Stock 2 = 1.2
Beta of Stock 2 = 1.2 / 0.5
Beta of Stock 2 = 2.4

Answer = Beta of the second stock = 2.40

jeff jeffy answered 1 year ago

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