You invest 50% of your money in security A with a beta of 1.6 and the rest of your money in security B with a beta of 0.7. The beta of the resulting portfolio is
A) 1.40.
B) 1.15.
C) 0.36.
D) 1.08.
E) 0.80.

Question

Quizplus · Accepted Answer

The beta of the portfolio is calculated as the weighted average of the betas of the individual securities. Here, it's (0.5 * 1.6) + (0.5 * 0.7) = 0.8 + 0.35 = 1.15.

You Invest 50% of Your Money in Security a with a Beta