You want your portfolio beta to be 0.90.Currently,your portfolio consists of $4,000 invested in stock A with a beta of 1.47 and $3,000 in stock B with a beta of 0.54.You have another $9,000 to invest and want to divide it between an asset with a beta of 1.74 and a risk-free asset.How much should you invest in the risk-free asset?
A)$3,965.52
B)$4,425.29
C)$4,902.29
D)$5,034.48
E)$5,683.92

Question

Quizplus · Accepted Answer

Beta_Portfolio = 0.90 = ($4,000/$16,000)(1.47) + ($3,000/$16,000)(0.54) + (x/$16,000)(1.74) + (($9,000 - x)/$16,000)(0); Investment in risk-free asset = $9,000 - $3,965.52 = $5,034.48

You Want Your Portfolio Beta to Be 0