You invest $200 in security A with a beta of 1.4 and $800 in security B with a beta of 0.3. The beta of the resulting portfolio is
A) 1.40.
B) 1.00.
C) 0.52.
D) 1.08.
E) 0.80.

Question

Quizplus · Accepted Answer

The portfolio beta is calculated as the weighted average of the individual securities' betas. The weights are based on the proportion of the total investment in each security. For security A: (200/1000)*1.4 = 0.28. For security B: (800/1000)*0.3 = 0.24. Adding these gives the portfolio beta: 0.28 + 0.24 = 0.52.

You Invest $200 in Security a with a Beta of 1.4