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

The new portfolio beta is calculated as a weighted average of the betas of its components. Thus, the new beta = (0.80 * 1.25) + (0.20 * 1.75) = 1.00 + 0.35 = 1.35.

You Have a Portfolio with a Beta of 1