A portfolio is comprised of 35 securities with varying betas.The lowest beta for an individual security is .74 and the highest of the security betas of 1.51.Given this information, you know that the portfolio beta:
A)must be 1.0 because of the large number of securities in the portfolio.
B)is the geometric average of the individual security betas.
C)must be less than the market beta.
D)will be between 0 and 1.0.
E)will be greater than or equal to .74 but less than or equal to 1.51.

Question

Quizplus · Accepted Answer

The portfolio beta is a weighted average of the individual security betas, so it will fall between the lowest and highest individual betas, which are 0.74 and 1.51.

A Portfolio Is Comprised of 35 Securities with Varying Betas