What is the beta of a portfolio if 30% of the funds are invested in a risk-free asset, 40% in the market portfolio, and the balance in a portfolio that has three times the risk of the market portfolio?
A)0.4
B)0.7
C)1.3
D)1.8

Question

Quizplus · Accepted Answer

βportfolio = (weight of risk-free asset x βrisk-free asset) + (weight of market portfolio x βmarket portfolio) + (weight of high-risk portfolio x βhigh-risk portfolio)
= (0.3 x 0) + (0.4 x 1) + (0.3 x 3 x 1) 
= 0 + 0.4 + 1.8 
= 2.2 
Therefore, βportfolio = 2.2/100 = 1.3.

What Is the Beta of a Portfolio If 30% of the Funds