In: Finance
Your portfolio has a beta of 1.25. The portfolio consists of 17 percent U.S. Treasury bills, 29 percent in stock A, and 54 percent in stock B. Stock A has a risk-level equivalent to that of the overall market.
What is the beta of stock B?
How can I use Excel to Find Beta?
Beta of treasury bills will be zero because they are considered risk free.
Since stock A has risk level equivalent to that of the overall market, the beta of stock A will be 1.
Portfolio Beta = (Beta of stock A * Weight of stock A) + (Beta of stock B * Weight of stock B) + (Beta of Treasury bills * Weight of treasury bills)
(Beta of stock B * Weight of stock B) = Portfolio Beta - (Beta of stock A * Weight of stock A) - (Beta of Treasury bills * Weight of treasury bills)
Beta of stock B = (Portfolio Beta - (Beta of stock A * Weight of stock A) - (Beta of Treasury bills * Weight of treasury bills))/Weight of stock B
We can calculate Beta in the excel using above formula