You have a portfolio with a beta of 3.1. What will be the new portfolio beta if you keep 85 percent of your money in the old portfolio and 15 percent in a stock with a beta of 4.5?
A) 3.31
B) 3.51
C) 3.61
D) 3.71

Question

Quizplus · Accepted Answer

The new portfolio beta is calculated as a weighted average of the betas of the components. For the old portfolio (85% at beta 3.1) and the new stock (15% at beta 4.5), the calculation is: (0.85 * 3.1) + (0.15 * 4.5) = 2.635 + 0.675 = 3.31.

You Have a Portfolio with a Beta of 3