Table 8.3
Consider the following two securities X and Y.
-Using the data from Table 8.3,what is the beta for a portfolio with two-thirds of the funds invested in X and one-third invested in Y?
A)0.88
B)1.17
C)1.33
D)1.67

Question

Table 8.3
Consider the following two securities X and Y. 
-Using the data from Table 8.3,what is the beta for a portfolio with two-thirds of the funds invested in X and one-third invested in Y?
A)0.88 
B)1.17 
C)1.33 
D)1.67

Quizplus · Accepted Answer

Beta of X = 1.10 and Beta of Y = 1.60.

To find the beta of the portfolio with two-thirds of funds invested in X and one-third invested in Y, we use the formula:

Beta of portfolio = (2/3) * Beta of X + (1/3) * Beta of Y

= (2/3) * 1.10 + (1/3) * 1.60

= 0.73 + 0.53

= 1.26

Therefore, the beta for the portfolio is 1.26, which is closest to 1.33 (option C).

Table 8.3 Consider the Following Two Securities X and Y