Question

You own a portfolio equally invested in a risk-free asset and
two stocks. One of the stocks has a beta of 1.2 and the total
portfolio is equally as risky as the market.

What must the beta be for the other stock in your portfolio?
**(Do not round intermediate calculations and round your
answer to 2 decimal places, e.g., 32.16.)**

Beta

Answer #1

Information Given: | |

Beta of one Stock (Bs1) | 1.20 |

Beta of Portfolio (Bp)= Beta of Market |
1.00 |

Weight of One Stock (Ws1) | 1/3 |

Weight of Other Stock (Ws2) | 1/3 |

Weight of Risk Free Asset (Wrf) | 1/3 |

Remember: Beta of Risk Free Asset | 0.00 |

Beta of Other Stock (Bs2) | ??? |

Beta of Portfolio (Bp) = Wrf*Brf + Ws1*Bs1 + Ws2*Bs2 | |

1= 1/3*(0)+1/3*(1.20)+1/3*(Bs2) | |

1= 0+0.40+1/3*(Bs2) | |

1-0.40=1/3*(Bs2) | |

0.60*3= Bs2 | |

Beta of Other Stock =
1.80 |

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(Do not round intermediate calculations and round your
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#5
Bob owns a portfolio that is one-third invested in a risk-free
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(Do not round intermediate calculations
and round your answer to 2 decimal places, e.g.,
32.16.)

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1)
You want to create a portfolio equally as risky as the market,
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calculations and round your answers to 2 decimal places, e.g.,
32.16.)
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Beta
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$
?
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$
?
?
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