An investor divides her portfolio into thirds,with one part in Treasury bills,one part in a market index,and one part in a diversified portfolio with beta of 1.50.What is the beta of the investor's overall portfolio?

Question

Quizplus · Accepted Answer

The beta of the overall portfolio is the weighted average of the betas of the individual assets. The beta of Treasury bills is 0, the beta of the market index is 1, and the beta of the diversified portfolio is 1.50. Therefore, the beta of the overall portfolio is (0 + 1 + 1.50) / 3 = 0.833.

An Investor Divides Her Portfolio into Thirds,with One Part in Treasury