You have a €1,000 portfolio which is invested in shares A and B plus a risk-free asset.€400 is invested in shareA.Share A has a beta of 1.3 and share B has a beta of 0.7.How much needs to be
Invested in share B if you want a portfolio beta of 0.90?
A)€0
B)€268
C)€482
D)€543
E)€600

Question

Quizplus · Accepted Answer

To achieve a portfolio beta of 0.90 with a €1,000 portfolio, we use the formula for the weighted average of the betas: $0.90 = \frac{400 \times 1.3 + x \times 0.7}{1000}$, where $x$ is the amount invested in share B. Solving for $x$ gives us €543.

You Have a €1,000 Portfolio Which Is Invested in Shares