An investor has a portfolio with an expected return of 11.19%. The portfolio is evenly invested in a stock and a risk-free asset. The market has an expected return of 17% and the risk-free asset has an
Expected return of 3%. What is the beta of the stock?
A) .98
B) 1.17
C) 1.43
D) 1.62
E) 1.94

Question

Quizplus · Accepted Answer

The correct answer is B. The beta of the stock can be calculated using the following formula:Beta = (Expected return of portfolio - Expected return of risk-free asset) / (Expected return of market - Expected return of risk-free asset)Plugging in the given values, we get:Beta = (11.19% - 3%) / (17% - 3%) = 1.17

An Investor Has a Portfolio with an Expected Return of 11.19