What is the beta for a portfolio equally weighted in four assets: A, the market portfolio; B, which has half the risk of A; C, which has twice the risk of A; and D, which is risk-free?
A) 0.500
B) 0.750
C) 0.875
D) 1.250
E) 1.375

Question

Quizplus · Accepted Answer

The beta of the market portfolio (A) is 1. Asset B, with half the risk of A, has a beta of 0.5. Asset C, with twice the risk of A, has a beta of 2. The risk-free asset (D) has a beta of 0. The average beta of the portfolio is calculated as (1 + 0.5 + 2 + 0) / 4 = 0.875.

What Is the Beta for a Portfolio Equally Weighted in Four