Ask Question
5 March, 20:38

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

+4
Answers (1)
  1. 5 March, 20:57
    0
    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
Know the Answer?
Not Sure About the Answer?
Find an answer to your question 👍 “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 ...” in 📗 Business if the answers seem to be not correct or there’s no answer. Try a smart search to find answers to similar questions.
Search for Other Answers