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You own a portfolio equally invested in a risk-free asset and two stocks. If one of the stocks has a beta of 1.27 and the total portfolio is equally as risky as the market, what must the beta be for the other stock in your portfolio

Respuesta :

Answer:

the beta be for the other stock in your portfolio is 1.73

Explanation:

The computation of the beta be for the other stock in your portfolio is shown below:

Given that

risk free asset contains the beta of 0

And,  

market beta = 1

Now  

1 = 1 Ă· 3 Ă— 0 + 1 Ă· 3 Ă— 1.27 + 1 Ă· 3 Ă— beta

The beta of other stock = 1.73

hence, the beta be for the other stock in your portfolio is 1.73

Here we assume that one-third should be invested in all 3 things each

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