You would like to combine a risky stock with a beta of 1.87 with U.S.Treasury bills in such a way that the risk level of the portfolio is equivalent to the risk level of the overall market.What percentage of the portfolio should be invested in the risky asset?
A)46.29%
B)53.48%
C)50.55%
D)47.45%
E)57.08%

Question

Quizplus · Accepted Answer

β_Risk-free = 0 β_Market= 1 1 = [x × 1.87] + [(1 − x)× 0] x = 0.5348,or 53.48%

You Would Like to Combine a Risky Stock with a Beta