You have a $12,000 portfolio which is invested in stocks A and B,and a risk-free asset.$5,000 is invested in stock A.Stock A has a beta of 1.76 and stock B has a beta of 0.89.How much needs to be invested in stock B if you want a portfolio beta of 1.10?
A) $3,750.00
B) $4,333.33
C) $4,706.20
D) $4,943.82
E) $5,419.27

Question

Quizplus · Accepted Answer

Beta_Portfolio = 1.10 = ($5,000/$12,000)(1.76) + (x/$12,000)(0.89) + (($12,000 - $5,000 - x)/$12,000)(0); x = $4,943.82

You Have a $12,000 Portfolio Which Is Invested in Stocks