You invest $600 in security A with a beta of 1.5 and $400 in security B with a beta of .90.The beta of this portfolio is _________.
A) 1.14
B) 1.20
C) 1.26
D) 1.50

Question

Quizplus · Accepted Answer

To calculate the beta of a portfolio, we need to use the formula: 
(Beta of portfolio) = (weight of security A) x (beta of security A) + (weight of security B) x (beta of security B). 
Substituting the given values, we get: 
Beta of portfolio = (0.6 x 1.5) + (0.4 x 0.9) = 0.9 + 0.36 = 1.26 
Therefore, the beta of the portfolio is 1.26. The best choice is (C).

You Invest $600 in Security a with a Beta of 1.5