A portfolio contains two assets.The ﬁrst asset comprises 40% of the portfolio and has a beta of 1.2. The other asset has a beta of 1.5.The portfolio beta is
A)1.35
B)1.38
C)1.42
D)1.50
E)1.55

Question

Quizplus · Accepted Answer

To calculate the portfolio beta, we need to use the following formula:
Portfolio beta = (Weight of Asset 1 × Beta of Asset 1) + (Weight of Asset 2 × Beta of Asset 2)
= (0.40 × 1.2) + (0.60 × 1.5)
= 0.48 + 0.90
= 1.38
Therefore, the portfolio beta is 1.38, which is closest to choice B.

A Portfolio Contains Two Assets