Suppose Stock M has an expected return of 10%, a standard deviation of 15%, and a Beta of 0.6 while Stock N has an expected return of 20%, a standard deviation of 25% and a beta of 1.04, and the correlation between the two stocks is 0.50. What is the beta for a portfolio with 80% invested in Stock M and 20% invested in Stock N?
A) 0.688
B) 0.738
C) 0.878
D) 0.968

Question

Quizplus · Accepted Answer

The beta of a portfolio is calculated as the weighted average of the betas of the individual stocks. For this portfolio: Beta = (0.8 * 0.6) + (0.2 * 1.04) = 0.688.

Suppose Stock M Has an Expected Return of 10%, a Standard