Question

You invest $600 in a security with a beta of 1.5 and $400 in another security...

You invest $600 in a security with a beta of 1.5 and $400 in another security with a beta of 0.90. The beta of the resulting portfolio is ____.

A.

1.36

B.

0.80

C.

1.40

D.

1.26

E.

1.00

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Answer #1

Ans D. 1.26

Stock INVESTMENT (i) Beta (ii) Investment* Beta (i)* (ii)
1                        600                      1.50                                   900.00
2                        400                      0.90                                   360.00
Total                    1,000                               1,260.00
AVERAGE BETA = (INVESTMENT * BETA) / TOTAL INVESMENT
1260 / 1000
1.26
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