A portfolio contains four assets.Asset 1 has a beta of .7 and composes 40% of the portfolio.Asset 2 has a beta of 1.3 and composes 20% of the portfolio.Asset 3 has a beta of 1.1 and composes 20% of the portfolio.Asset 4 has a beta of 2.16 and composes the remaining 20% of the portfolio.If the riskless rate is expected to be 3% and the market risk premium is 7%,what is the beta of the portfolio?
A)1.19
B)1.24
C)1.30
D)1.48
E)1.64

Question

Quizplus · Accepted Answer

The beta of the portfolio is the weighted average of the betas of the individual assets. In this case, the beta of the portfolio is:(0.4 * 0.7) + (0.2 * 1.3) + (0.2 * 1.1) + (0.2 * 2.16) = 1.19

A Portfolio Contains Four Assets