Your portfolio has a beta of 1.25. The portfolio consists of 17 percent U.S. Treasury bills,...

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?

Solutions

Expert Solution

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

jeff jeffy answered 1 year ago

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