Portfolio Beta You have a portfolio with a beta of 1.25.What will be the new portfolio beta if you keep 80 percent of your money in the old portfolio and 20 percent in a stock with a beta of 1.75?
A)1.00
B)1.35
C)1.50
D)3.00

Question

Quizplus · Accepted Answer

To find the new portfolio beta, we can use the following formula:

New Portfolio Beta = (Weight of Old Portfolio * Beta of Old Portfolio) + (Weight of New Stock * Beta of New Stock)

Plugging in the values, we get:

New Portfolio Beta = (0.8 * 1.25) + (0.2 * 1.75) = 1.35

Therefore, the new portfolio beta will be 1.35 if 80 percent of the money is kept in the old portfolio and 20 percent in a stock with a beta of 1.75. The correct answer is B.

Portfolio Beta You Have a Portfolio with a Beta of 1.25.What